News & Articles
Florida needs to store natural gas
By Harold McLean
April 25 2007
Pubished in the Sun-Sentinel
According to recently released statistics from the U.S. government, the average retail price of electricity in December 2006 was $8.49 per kilowatt hour. Florida's average was $10.33. Even worse, while average U.S. electricity prices rose only 28 cents in December 2006 (versus December 2005), Florida's prices increased by 16 percent, up $1.43.
Why?
Much of Florida's electricity is generated from power plants using natural gas. Natural gas is a clean, efficient and usually economical energy source.
But, sometimes snowstorms in the Northeast or hurricanes in the Gulf of Mexico cause natural gas prices to spike. When this happens, power producers in many states can use the natural gas they have in storage rather than pay these temporarily high rates.
While Florida is one of the largest users of Gulf Coast natural gas, it is one of the few states without the ability to store natural gas within its own borders. Therefore, when natural gas prices spike, Florida consumers pay the price -- literally.
Florida electricity bills have two separate charges. The first is a base rate set by the Public Service Commission. The second is the fuel charge. This charge is a pass-through of the price power companies pay for the fuel (natural gas, fuel oil, coal, etc.) they use to generate electricity. When fuel prices go up, the fuel charge increases by a like amount. When fuel prices come down, consumers' bills also decrease.
Florida needs to do what most other states do and store natural gas within the state close to consumers. Storage could easily save the state's ratepayers millions of dollars a year - just by avoiding a few days of price spikes!
Natural gas storage also has other advantages. Florida gets all its natural gas from two pipelines that deliver gas from the Gulf states. When hurricanes disrupt Gulf or pipeline operations, Florida's gas supply is at risk. We can and should store enough natural gas here in this state to ensure that our power plants can keep operating in the aftermath of a hurricane or any other emergency that affects the Gulf.
Demand for natural gas is expected to increase in Florida by more than 75 percent over the next 10 years. While our current pipeline capacity is adequate for today's needs,it will not be adequate for tomorrow's needs. Natural gas storage facilities constructed in southern Florida can actually help add peak-day capacity to the gas delivery system and this will help further moderate demand and, again, moderate prices.
For many years, there have been hundreds of above-ground and underground natural gas storage facilities across the United States. Florida needs the same tools to help manage demand and ensure reliability.
Harold McClean was formerly public counsel for the Florida Legislature and consumer advocate for the Florida Public Service Commission. He can be reached at halmc@earthlink.net.
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