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News & Articles
In-state natural-gas storage would help keep lights on after storms
Sunday, June 17, 2007
The Palm Beach Post
By MIKE TWOMEY
This year, we began hurricane season with a subtropical storm. Then Tropical Storm Barry brought wind and heavy rains to the state on June 1. We don't know what to expect from here, though predictions are for an active storm season.
Among other things, hurricane seasons serve as reminders that Floridians are vulnerable to potential fuel supply interruptions. More of Florida's electricity is generated from natural gas than from any other energy source. This gas comes into the state primarily through two pipelines from other hurricane-prone states along the Gulf of Mexico. Storms can and do create supply interruptions. Most states that are heavy natural gas users have market-area storage facilities located near consumers, close enough to avoid potential pipeline bottlenecks. These facilities allow gas supplies to be stored near customers so that stored gas can be used to increase peak-day deliverability or held to use in the event of a supply interruption. Currently, the closest gas storage for Florida is in Mississippi and Alabama.
Now that the Florida Public Service Commission has declined Florida Power & Light's application for a coal-fired power plant in Glades County, Florida's dependence on natural gas will necessarily be even greater. However, the PSC will also rightly expect Florida utilities to manage gas price volatility. In 2005-06, the state's electric customers paid an additional $2 billion-plus in fuel adjustment increases resulting from skyrocketing natural gas prices. It is imperative that Florida have gas storage within the state to reduce and manage both supply interruptions and peak-period price spikes.
Fortunately, there is at least one natural gas storage facility being proposed for Florida. It is making its way through the permitting process with the Federal Energy Regulatory Commission. The Floridian Natural Gas Storage Project (www.floridiangasstorage.com) is proposed to be sited in Martin County, near the intersection of both the major import pipelines. This storage facility would be able to store enough natural gas for power generation to supply 4 million homes for 10 to 20 days, if necessary.
The stored gas also could be used to avoid price spikes during peak-periods of higher demand. Since fuel costs are passed along to Florida consumers by the utilities, Floridians stand to save tens of millions of dollars a year if utilities use market-area storage facilities to buy gas when prices are cheap to use when prices temporarily spike because of high demand or supply interruptions. As an added benefit, using clean- burning natural gas to supply peak-day generation needs provides significant environmental benefits by avoiding the burning of fuel oil on those days.
Better yet, this storage facility would be paid for through private investment - which means that the $500''million development costs would not be included in the consumer rate base. Only those utilities contracting for storage service would pay for storage fees - fees which would be offset through use of lower-cost natural gas prices during peak periods. Of course, this means that only those utilities contracting for storage would be able to offer the supply security and price-shaving benefits to their customer base.
According to a recent study by Florida Atlantic University, an added bonus of this project is that its construction would expand Florida's economy. "In addition to the important economic benefits that will flow to Florida as a result of the backup fuel supply that will be created by the (Martin County) gas storage facility, the project will generate positive economic impacts on income and employment," said the report by FAU's Center for Urban and Environmental Studies. FAU projects an impact of more than $300 million due to construction on just one of the two proposed storage tanks. The finished facility is projected to pay more than $2 million in local taxes.
Floridians must have more control over their energy future. The Martin County natural gas storage project, a well-tested, proven technology used at more than 100 other sites around the country, is one important step toward this goal.
Two things must happen to make this project a reality. First, the company must receive permits from FERC and state and local permitting agencies. Second, Florida's electric providers must add to their tool kits by contracting for in-state gas storage now so it will be available when it's needed. Florida ratepayers have everything to gain with the completion of this project - and much to lose if it fails.
Mike Twomey is president of Florida Utility Watch Inc., a consumer advocacy organization that "works to protect Floridians from high utility bills and unfair business practices."
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