Experts: Deregulating Florida’s Utilities will be Costly and Risky

by | Feb 22, 2019

State officials heard testimony from energy sector experts on Thursday afternoon that warned of dire financial consequences if Florida chooses to deregulate its utility industry. But a special interest group with ties to the natural gas industry is pushing forward with a scheme designed to dismantle Florida’s current utility structure under the guise of “energy choice” for consumers. The group behind the effort, Citizens for Energy Choices, wants state officials to approve ballot language that, if passed by a 60 percent vote, would completely gut Florida’s energy providers.

A similar proposal was rejected last year by a group of citizens on Florida’s Constitution Review Commission, but the special interest group is back at it again this year with enough money to force the issue onto the 2020 ballot.

At issue during Thursday’s hearing in Tallahassee: how much the scheme will cost Florida’s state and local governments. Those costs are ultimately passed on to taxpayers and small businesses. And the answer wasn’t pretty.

“There is no credible scenario in which the impact will not be substantial and in which the numbers are very large and very negative,” said John Reed, Chairman and CEO of Concentric Energy Advisors. “The impact on state and local government would be between $1.3 and $1.7 billion dollars in upfront costs, plus $825 million in annual, ongoing costs. These are very conservative estimates on the impacts here.”

Reed’s analysis was backed up by a second independent firm, Charles River Associates, which predicted the financial impact to be somewhere between $1.2 to 1.5 billion annually. Charles River Associates was hired by the Florida Chamber of Commerce to conduct the financial assessment.

When questioned by state officials about the financial impact if energy prices were to actually go down, which is the intent of deregulation, Reed pointed out that there’s no definitive evidence from other deregulated states that prices would actually go down. Calling the record “mixed,” he testified that his analysis removed energy prices completely from the equation to isolate the actual costs of moving to a deregulated market.

“You start with a $10 billion hole,” Reed said.

Concentric Energy Advisors is an energy audit firm hired by the utility companies to assess the financial impact of deregulation.

Proponents of the deregulation scheme did not present any financial impact estimates during the hearing to counter the bad news, but promised to do so in an upcoming meeting in early March. Those pushing for deregulation have consistently pointed to the state of Texas, which partially deregulated their utility industry in 2002. The proponents have said previously that current energy prices in Texas have moved below the national costs of energy. But others present at the hearing were less positive about Texas’s experience with deregulation.

Mike Nasi, an attorney from Texas representing a group called Energy Fairness, testified that the example of Texas was an argument against deregulation.

“I think it’s absolutely right when it was said that we should only look at Texas,” said Nasi. “Because Texas can tell you all you need to know about deregulation, which is, wait. Because the Texas experiment is not over. Lots of costs in the interim, and lots of liability exposure now.”

Other experts appearing before state officials on Thursday, including Florida Taxwatch and other independent experts, effectively formed a parade of bad news if Florida moves forward with deregulation.



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