Jan
11
2018

PACE Continues Florida Engagement on Deregulation

On Friday, the Florida Constitution Revision Commission will once again examine deregulation of the wholesale and retail electricity markets. PACE will testify, as we did in December, to share our views and research on why deregulation doesn’t work for consumers. 

Dear Chair Thurlow-Lippisch:

Thank you for reconvening the General Provisions Committee on January 12 for a portion of the morning to further discuss Proposal 51. The Partnership for Affordable Clean Energy will appear again in order to shed light on why Florida should not enshrine complex electricity policy in its Constitution and explain why the Texas electricity market isn’t something Florida should seek to emulate.

The proposed strike-all amendment 513104 to Proposal 51 now itself makes the case for why this topic and its concepts should not be cemented in Florida’s Constitution by, in four distinct places, referring to tasks the Legislature should undertake, including in clause (c), adopting “comprehensive legislation to implement this section … which shall take effect January 1, 2023.”

Advocates for Proposal 51 who speak continuously of innovation also make the case. As electricity markets evolve, if innovation is the trend, chiseling the superstructure of wholesale and retail electricity markets into stone makes no sense. Why should Florida bind itself to a minority of U.S. states who have seen nothing better than mixed results after two decades of experimentation with organized wholesale markets and retail choice?

The Lone Star State comes up repeatedly as a model, most likely because Infinite Energy serves in parts of Texas’ deregulated markets. It and 62 other companies offer the public chances to rate their service on a scale of 1 to 5 stars. Out of the 63 companies, only 1 has 5 stars, while 2 have slightly over 4 stars. Our friends at Infinite Energy receive 3.5 stars. Thirty-seven of the 63 companies – nearly 60 percent – are rated under 3 stars. Put another way, the majority of Texas competitive retail electricity providers are poorly rated by their customers. So, while there may be choice in the Texas market, there’s not much good to choose from.

Florida should let the Lone Star State keep these 63 companies in their market to continue the deregulation experiment. If they set up shop in Florida, someone in state government will have to oversee them and ensure that Floridians are protected if the ups and downs of competition cause unsuitable business and marketing practices.

Press calls and lengthy papers continue to tout lower prices in Texas and the great benefit of building so much more generation. Prices eventually moderated in Texas, but much of the credit goes to the large, diverse and relatively young base load fleet in Texas that predated deregulation and the shale gas revolution which pushed natural gas commodity prices lower after, but not because of, deregulation.

The other major driver of lower prices is massive subsidies for construction of wind generation. These subsidies have caused overbuilding of wind generation and let artificially low-priced wind distort the market. Exposing wholesale markets to the volatility of commodity markets and subsidy policy shifts has resulted in large swings in Texas retail pricing and Texas prices are expected to, once again, swing back upward in the coming months. Whether Texas can soften those swings is an important lesson to learn before deeming the Texas experiment a success.

It is also important to note that market swings and distortions have become so drastic that Texas has lost traditional baseload plants, and new gas plants have not materialized, so Texas may not have enough cushion in its generation fleet to make it through a prolonged hot summer or other lengthy weather events. Just last month, Texas officials notified the public that this cushion had been cut in half since May of last year and is now far lower than what is recommended by the North American Electric Reliability Corporation (NERC) or Texas’ own Electric Reliability Council of Texas (ERCOT).

In the latter half of the 19th century, many southeasterners left their homes, placing the simple legend “GTT” on their front doors to let their families know they had Gone to Texas to seek better fortunes. Now, for-profit energy marketers have written “GTF” on their front doors. However, the citizens of Florida don’t have to open their doors or their wallets, and the Constitution Revision Commission should not force the issue.

Thank you again for creating a short forum tomorrow to discuss these critical issues.

Sincerely,

 

Laura M. Schepis

Executive Director

cc:        CRC Members