News & Articles
FLORIDA NEEDS NATURAL GAS STORAGE FACILITY
By Mike Twomey
Published in the Sun-Sentinel
July 14, 2007
While Gov. Charlie Crist hosted a conference on global warming this week, it is worth noting that more of Florida's electricity is generated from natural gas than from any other energy source.
Now that the Florida Public Service Commission has declined the application for a large coal-fired generation plant, Florida's dependence on natural gas will necessarily be even greater in the future. 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 has 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 currently 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 facility will 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 can also 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 is funded through private investment - which means the $500 million development costs will not be included in the consumer rate base. Only those utilities contracting for storage service will pay for storage fees - fees that will be offset through use of lower-cost natural gas prices during peak periods. Of course, this means that only those utilities contracting for storage will 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 will 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 written 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 facility is projected to pay more than $2 million in local taxes once it is completed.
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 key 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 toolkits 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 successful completion of this project - and much to lose if it fails.
Mike Twomey is president of Florida Utility Watch Inc., a consumer advocacy organization.
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