The Florida Public Service Commission (PSC) on Dec. 18 approved Florida Power & Light’s (FPL’s) request to invest in natural gas wells in Oklahoma.
NextEra subsidiary FPL, one of the largest natural gas consumers in the country—it burns more gas than any other electric utility, about 2 Bcf/d—filed the request this past June. The plan is to partner with independent oil and gas company PetroQuest Energy Inc. on a new venture to develop up to 38 natural gas wells in the Woodford Shale in Oklahoma. PetroQuest will oversee and operate the wells, while FPL now has approval to recover its development costs through its rate base.
FPL’s increasing dependence on gas—it is rapidly replacing its old coal- and oil-fired plants with modern combined cycle projects—has raised concerns about the risks of future price volatility. By investing directly in gas production, FPL hopes to insulate itself from potential price shocks.
FPL says the fuel cost savings from the deal over 30 years will be around $100 million, though this is a tiny fraction of its $4.5 billion annual fuel costs.
Though the deal is relatively small, the potential impact across the industry is large. Other utilities are said to be watching the project, and several have expressed interest in similar arrangements.
As part of the petition, FPL had asked the PSC for approval of draft guidelines for utility investments in natural gas production projects, but the Commission opted to defer a decision on that request until next year.
—Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWERmagazine).