florida restructuring energy choice

Florida Restructuring – Energy Choice

The Florida Supreme Court is currently reviewing a 2020 ballot initiative to push Florida restructuring for the electricity market. Deregulation has been hugely successful in Texas. If the Florida restructuring ballot passes, what will happen with Florida energy choice?

In this article, we break down what it is, who’s for and against it, and why we support it.

What Does the “Florida Energy Choice Restructuring” Ballot Initiative Actually Say?

With all the op-eds and rhetoric, what the ballot actually says has been lost to the wind. Here’s the actual ballot title: Right to Competitive Energy Market for Customers of Investor-Owned Utilities; Allowing Energy Choice.

You can read the full version of the Florida restructuring ballot online. The basic premise is Florida electricity customers should be allowed to purchase competitively priced electricity.

From there, the ballot lines out what the government would need to do to delivery deregulation. That includes:

  • Limit the activity of investor-owned electric utilities to the construction, operation, and repair of electrical transmission and distribution systems (Interpretation: Electric utilities would not sell electricity, they would just deliver it.)
  • Promote competition in the generation and retail sale of electricity through various means, including the limitation of market power (Interpretation: Retail energy providers would enter the market and sell electricity; current utilities can also compete, if they establish a retail energy company.)
  • Protect against unwarranted service disconnections, unauthorized changes in electric service, and deceptive or unfair practices (Interpretation: The legislature would set up rules, much like the Public Utility Commission of Texas did in 2001.)
  • Establish an independent market monitor to ensure the competitiveness of the wholesale and retail electric markets.(Interpretation: An oversight agency or “traffic cop” would manage the markets, just like every other deregulated energy market.)

Cliff Notes Version:

Based on the ballot language, Florida’s restructured electricity market will operate almost identically to the Texas market. The Texas market is the most successful deregulated electricity market in the United States. It’s been operating efficiently since the market opened in 2001.

Florida Deregulation Could Look Like Texas Deregulation

Since Florida restructuring will look much like Texas’ electricity structure, let’s take a look at that market.

Senate Bill 7 required Texas investor-owned utilities to separate their poles & wires business from their supply and generation assets. For example: Houston Lighting & Power (HL&P) split into 3 companies, Reliant Energy (retail), Texas Genco (generation) and Centerpoint Energy (delivery).

But restructuring the Texas electricity market didn’t keep these utility companies from competing in the retail energy markets. Far from it!

The “affiliated retail energy providers” that emerged from the utility companies became some of the biggest names in the Texas retail energy market — TXU Energy, Reliant Energy and Direct Energy.

Deregulation in the Texas market also included creating a set of rules, elegantly named “Chapter 25” of the Public Utility Commission. These rules establish the requirements of becoming a retail energy provider and the consumer protections around enrollment, service and disconnection.

In the 19 years that Texas restructured its electricity market, there have been ups and downs. There have been retail energy providers that have gone out of business, there have been pricing spikes in the wholesale market, there have been retailers that have gamed the state shopping site, Power to Choose.

But through it all has been the creation of innovative products, additional consumer choice and new services. Plus it’s spurred investment in solar and wind energy on a scale not seen in other markets. Renewable energy now powers 18% of Texas’ electricity needs, compared to 3% of power in Florida, according to the Energy Information Administration.

Current Status of Florida Energy Choice Restructuring

The Florida attorney general, House and Senate have all denounced the Florida restructuring energy choice ballot initiative. The investor-owned utilities (who would face a major restructuring), Florida Power & Light, Tampa Electric, Gulf Power and Duke Energy, are big political donors and are helping spearhead opposition to the proposal.

Why is it so controversial?

Well, there are many big players (utilities) who are lobbying against it. But the official political statement is that the wording on the ballot is misleading.

The wording says, “wholesale and retail electricity markets (will) be fully competitive so that electricity customers are afforded meaningful choices among a wide variety of competing electricity providers.”

The problem? The ballot wording doesn’t make clear that the current investor-owned utilities will NOT be one of the choices.

What’s next? The Supreme Court heard arguments on August 28th whether the Florida voters will be allowed to vote on Florida restructuring. A Florida Supreme Court ruling should be out by the end of September.

The Texas Market Works Correctly

Meanwhile…as the Supreme Court considers the ballot wording and structure, special interest groups and lobbyists in Florida continue to work against electric choice for the Florida market.

They’ve pulled out fear tactics related to electricity prices. They’ve used the August 2019 blow out in Texas power pricing to spread fear to Florida voters. Even the president of Florida Power and Light (who frankly should know better) quoted the $9,000 MWh peak price in an op-ed on why Florida should not deregulate.

The reality is this:

First, the August Texas wholesale market worked as it was supposed to. Demand outstripped supply. Prices spiked. For a brief period, wholesale market prices spiked to $9,000 MWh. That signaled generators to turn on additional generation assets. The market came back to normal.

Second, very few end-consumers were affected by the price spike — because most consumers in Texas are on Fixed Price contacts. That’s an option that’s not even available to consumers in Florida.

Third, the market structure in Texas has spurred new investment in power production and infrastructure, specifically in new wind generation and new solar generation. This puts the Texas ERCOT overall reserve margin (percentage of power available over and above expected demand) in a great position for 2020 and 2021.

But of course utility companies in Florida don’t want to deregulate. Why would they want to forgo a guaranteed return on assets and rate cases approved by the public utility commission?

Here’s an eye opener. Florida doesn’t have enough power generation to meet its growing needs. And that’s not us saying it. Florida is the third largest energy consuming state in the US and one of the top producers of electricity in the nation. But according to the EIA, Florida does not produce enough electricity to meet current state power demand, and electricity demand in Florida is expected to increase.

Restructuring and a free market will spur investor development in wind, solar and traditional generation assets in Florida, just as it has in Texas.

Florida Electricity Choice Restructuring Will Bring Consumer Choices to Market

Despite the rhetoric and negative campaigning, we think Florida restructuring is a positive for consumers. With deregulation, Florida consumers will have more electricity plan options, access to fixed prices, and a simpler bill structure.

Three key benefits of Florida restructuring are:

Fixed price contracts protect consumers.

Consumers will be able to lock in and protect their electricity rate with a fixed price contract with the energy supplier of their choice.

Currently, Florida consumers are rate payers. Utilities charge consumers based on a rate case that they present to the Florida Public Service Commission for approval. With the Florida utilities, your electricity rate could change several times a year… and there’s nothing you can do about it.

With Florida electricity restructuring, you would be able to lock in a fixed rate contract term, with a guaranteed rate for your electricity. Fixed rate contracts would protect you from rate changes. You can choose to lock in your rate for a year, two years, or even five years.

Deregulated electricity bills are easier to understand

The utility rate structure can be fairly complex. For example, the August 2019 FPL Rates include:

  • Base charge
  • On-Peak Energy charge
  • Off-Peak Energy charge
  • Capacity charge
  • Conservation charge
  • Environmental charge
  • On-Peak Fuel charge
  • Off-Peak Fuel charge

Compare that to the electricity bill in a deregulated market:

  • Energy charge

Yup, it’s that simple

Restructuring offers more consumer choice.

If other restructured electricity markets are any example, Floridians will have a variety of plans to choose from. These are just some of the offers Florida deregulation could bring:

  • Renewable Energy Plans (100% solar or 100% wind)
  • Military Discount Plans
  • Senior Citizen Discount Plans
  • Energy Plans + Extras like Amazon Echo Dot, Google Home, Nest Thermostat
  • Time of Use Plans like free nights or free weekends, leveraging smart meters that are already being installed across the state.

Why ElectricityPlans Supports Florida Electricity Restructuring

As quoted in Bloomberg, “There aren’t a lot of people who love their electric utilities. There’s just an acceptance for a long period of time, until something happens.”

Restructuring is the something that happens. The opening of markets does bring disruption. It brings change. But it also brings innovation and new choices. Florida energy choice matters for the future of Florida.

Over 60% of Florida voters are in support of choice according to a survey performed in June 2019. And we are too.

Bring it to the ballot in 2020 and let the voters decide.