Florida utilities’ loss of $6.1 billion on bad fuel bets draws criticism
If you consistently lost money at a Las Vegas casino year after year, some would argue you have a gambling problem and ought to stay away from the poker table.
In the world of Florida’s electric utilities, losses totaling billions of dollars in bets on the future price of fuel result in a far different conclusion.
The utilities say the practice, which led to $6.1 billion in losses paid for by their customers, is a good thing for ratepayers and should continue.
That loss figure is cited by the Office of Public Counsel in the opening of a fight to convince state regulators to consider ending the practice of Florida’s investor-owned utilities “hedging” the price of fuel for power plants. In a hedge, a utility agrees to buy a volume of fuel in the future at a fixed price. If they agree to buy 1,000 gallons of oil to be delivered next year at $100 a barrel, utilities win if the market price climbs above $100. They lose if it falls below that.
On Thursday, the OPC will ask the Florida Public Service Commission to make hedging losses a central issue during their annual debate over utility electric rates. And the counsel’s office, which represents ratepayers before the PSC, said losses should be noted in the agency’s annual order that sets those rates. That way, it says, consumers will see the risk.
In the long run, the counsel’s office wants to challenge whether hedging should continue at all.
Hedging losses since 2002, plus forecast losses for 2015, are jaw-dropping, the counsel’s office says: $1.4 billion for Duke Energy Florida, $390 million for Tampa Electric, $4.1 billion for Florida Power & Light and $171 million for Gulf Power. (Duke disputes the numbers and said its losses are $1.1 billion.)
The counsel’s office tally translates to $815 on average for every electric customer in Florida.
