Florida utilities propose cuts to gas hedging after $6B in losses
- Florida's four largest utilities have jointly proposed reducing the scope of their hedging programs by about 25%, responding to calls from state regulators last year that changes were needed after $6 billion in losses in the last decade and a half.
- While the utilities maintain the programs are designed to reduce volatility – not necessarily prices – The Tampa Bay Times reports they filed with the Florida Public Service Commission last week to propose cutting the size of the programs.
- The state's largest utility, Florida Power & Light (FPL), has lost $4 billion for customers since its hedging program began in 2002. While fuel hedging typically locks in lower fuel costs, consistently low natural gas prices have meant the losses are all but inevitable, say utility supporters.
The Tampa Bay Times reports on a surprise move by FPL, Duke Energy Florida, Tampa Electric, and Gulf Power, to propose reigning in their hedging programs, limiting the fuel hedged by up to 25%. However, it may not be enough to satisfy critics of the practice.
"While natural gas prices have trended downward in recent years, neither future gas prices nor the level of price volatility can be predicted with any certain," according to the utilities' filing. "Additionally, the recent downward trend in natural gas market prices cannot continue indefinitely."
Opponents of fuel hedging, including the state's public counsel, say the practice needs to be stopped and the utilities' offer is little more than symbolic. Utilities argue that the programs aim to limit wild swings in fuel costs, and subsequent impacts on power bills, and despite the losses the programs are working.
"We stand by our position that hedging should be discontinued completely," J.R. Kelly, the public counsel who advocates for consumers at the Public Service Commission, told the Times. "While this is a nice gesture by the utilities, we stand by our position."
Since 2002, Duke Energy Florida lost almost $1.5 billion as a result of hedging; Tampa Electric lost $421 million; FPL lost $4 billion; and Gulf Power lost about $170 million.
In December, regulators determined the hedging program could continue but would require changes. "We'd probably be critical of [the utilities] if they weren't at least considering it," said PSC Commissioner Lisa Edgar.
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