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Msg  1129 of 1512  at  7/6/2019 11:49:13 AM  by


Solar could serve both utilities if NextEra combines FPL, Gulf Power

from SNL Power Daily with Market Report
Solar could serve both utilities if NextEra combines FPL, Gulf Power

BYLINE: Ellen Meyers


A $400 million, 176-mile transmission line that will connect Gulf Power Co.'s service territory in the Florida panhandle to Florida Power & Light Co. customers in the state's northeast could boost the value of solar generation for both utilities thanks to their time zone difference.

Optimizing solar is one of several potential benefits likely to factor into any decision by NextEra Energy Inc. to merge its two regulated subsidiaries into one utility, along with other corporate and regulatory obligations it could streamline through a merger.

During NextEra Energy's investor conference June 20, Gulf Power President Marlene Santos said management is assessing the impacts of merging flagship utility FPL and Gulf Power, which NextEra purchased from Southern Co. in 2018. As of June 26, NextEra Energy said it is still reviewing all options on what combining the two companies would mean for customers currently served by FPL and Gulf Power.

"FPL and Gulf Power believe in providing outstanding service at fair rates, and we've proven that we're committed to doing the right thing for customers," a NextEra spokesperson said in a statement to S&P Global Market Intelligence. "It would be premature to provide any further details until additional studies have been completed."

FPL serves nearly 5 million customers in southern Florida as well as the state's northeast, while Gulf Power has about 460,000 customers in the Florida panhandle. Since the panhandle is in the Central Time Zone, while the rest of Florida is in Eastern Time Zone, Gulf Power's North Florida Resiliency Connection transmission project could help with electricity demand and solar generation.

"Once the line is built, it's very possible that solar in Gulf's territory monitors very valuable because it is time shifted from where most of the load is," NextEra Chairman, President and CEO Jim Robo said during the investor presentation. "You will be able to deliver solar at that last hour when the sun is setting, but it hasn't set yet where Gulf is."

Michael Goggin, vice president of consulting firm Grid Strategies LLC, said having larger grid operating areas connected by transmission allows utilities to better adjust to variance in weather and climate across different regions. In the case of FPL and Gulf Power, their time zone difference shifts supply and demand peaks for electricity and could help mitigate sudden demand surges, such as when people come home in the evenings or ramp up air conditioning during hot summer days.

"One of the biggest benefits is having the diversity in demand patterns: people are going to work an hour later, coming home an hour later, turning on air conditioning an hour later," Goggin said in an interview. "All of that helps even out demand and can also help with renewables."

The time zone difference would also mean the hypothetical-merged utility could rely more on its generation portfolio, rather than needing to purchase power from elsewhere, said Sue Tierney, a senior adviser for economic consulting firm Analysis Group.

Solar's output profile varies slightly less than wind since the sun follows the same east-to-west track. Florida is large enough to have localized weather issues such as cloud coverage affect one part of the state while another region has plenty of sunshine.

"Renewables is increasing that value of geographical diversity, larger grid operating areas and transmission," Goggin said.

The time zone difference could also make the case for more renewables in Gulf Power's generation profile. Gulf Power is currently developing three projects with a combined capacity of 225 MW across northwestern Florida, but its current energy mix relies mostly on coal and natural gas. Meanwhile, FPL plans to install 30 million solar panels by 2030, which would likely translate to more than 6,000 MW in new capacity. Were the two utilities to merge, any community solar or residential solar programs by FPL would almost certainly be offered to Gulf Power's current customers.

"You would expect if they were to be one company, it would be extremely unusual for the utility to not make a program available to anybody in the service territory," Tierney said in an interview. "I could entirely imagine that would be one of the consequences."

Combining the two companies into one utility would also simplify compliance with the Florida Public Service Commission; for example, a merged company would only have to file one rate case with the PSC, rather than separate ones for FPL and Gulf Power.

A merged utility would also only have to create and manage one long-term plan for hardening the grid against storms. On June 27, Gov. Ron DeSantis signed legislation requiring investor-owned utilities to submit 10-year storm protection plans to the PSC and allow utilities to recover related costs through a recovery clause rather than base rates.

NextEra also likely stands to enjoy savings from consolidating, Tierney said. If Gulf Power and FPL became one entity, the new company would be able to streamline several departments such as customer service, account management and legal. Any such benefits for the utility and customers would play a role for regulators in granting necessary approvals of the merger.

Regardless of whether and how NextEra combines the utilities, executives said they remain committed to serving customers across all service areas.

"We're going to take a look at all the puts and takes on this, and make sure that whatever we do is going to be first off in the best interest of making sure all customers, FPL and Gulf customers, there's a benefit that we can articulate in front of the commission, make sure they're comfortable with it," FPL President and CEO Eric Silagy said at NextEra's investor conference. "It's not just short term, but also long term."

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