A Florida utility must refund nearly $24.5 million to customers since the state’s highest court ruled that state regulators exceeded their authority by allowing recoupment of speculative investment charges involving a Louisiana-based hydraulic fracking company with Oklahoma holdings.
Against staff recommendations, the Florida Public Service Commission unanimously approved guidelines last June allowing Florida Power & Light to charge customers up to $750 million annually for speculative natural gas fracking activities without regulatory oversight, according to an article published in the Miami Herald.
The utility became the first in the nation to charge customers for its speculative investment in fracking operations.
PetroQuest Energy, Inc. of Lafayette, Louisiana was FPL’s joint venture partner in the $191 million Woodford Gas Reserves Project located in Oklahoma.
While FPL posted a profit of nearly 11.3 percent, customers lost money as the utility “claimed that it would provide a long-term hedge against volatile fuel costs” and should be “charged to customers under its fuel-recovery clause,” according to the Miami Herald report.
Florida’s high court concluded that regulators overreached when they allowed FP&L to charge customers for the risky investment.
“Treating these activities as a hedge requires FPL’s end-user consumers to guarantee the capital investment and operations of a speculative oil and gas venture without the Florida Legislature’s authority,” wrote Justice Ricky Polston, in the 6-1 court opinion.
In determining that the Public Service Commission’s ability to allow the utility to recover costs “is permissible only for costs arising from the ‘generation, transmission or distribution’ of electricity” while “the exploration, drilling and production of fuels falls outside the purview of an electric utility as defined by the Legislature,” the Florida court indicated the investment was a risk that should be charged to shareholders rather than ratepayers.
There is no definitive word on how FPL will refund the money although the utility is proposing bill credits as an alternative.