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Financial effects of Fla. electric deregulation initiative 'unknowable' for now

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According to the Financial Impact Estimating Conference, academic research is split on how restructuring electricity markets would affect customers' utility bills.
Source: Florida Power & Light

The financial impacts of a proposed ballot initiative to deregulate Florida's electricity market will remain unclear until state lawmakers take action on the issue, according to economists from the legislature's research arm.

Opening Florida's wholesale and retail electricity markets to competition and redesigning a new electricity market system "is unknowable until the Legislature acts," according to the Financial Impact Estimating Conference, a unit within the state's Office of Economic and Demographic Research that examines the financial impact of proposed constitutional amendments.

"There will be significant costs to state and local governments to transition to a fully operational system," the committee wrote in a March 15 report to Florida Attorney General Ashley Moody. "The cost of purchasing electricity by governments may be higher or lower, depending on changes in charges for electricity resulting from the amendment. As currently administered, several government revenues would be reduced, but the legislative response to these effects is unknown."

Citizens for Energy Choices has been circulating a petition that would allow customers of investor-owned utilities "the right to choose their electricity provider and to generate and sell electricity." The proposed amendment would require the Florida Legislature to adopt legislation, effective June 1, 2025, that opens wholesale and retail electricity markets to completion.

The proposal also limits the state's investor-owned utilities to building, operating and repairing transmission and distribution systems, meaning utilities would have to sell their generation assets. Florida Power & Light Co., Duke Energy Florida LLC and Tampa Electric Co. have spoken out against the initiative, arguing that Florida's regulated electricity market has kept customers' bills lower compared to peers across the U.S. Moody also opposes the proposed constitutional amendment, telling the Supreme Court of Florida that the initiative is "misleading" regarding what it would actually mean for customers and investor-owned utilities and difficult for voters to understand.

In its analysis, the Financial Impact Estimating Conference said academics are divided on whether restructuring electricity markets lowers or raises prices. Several studies have found restructuring causes prices for residential, commercial and industrial customers to fall by up to 11%, but other research has found that there tends to be no statistically significant effect on prices.

"The economic theory underlying deregulation is that free market competition either drives down electric prices or staves off increases by providing incentives to keep down costs and pursue operational efficiencies," the committee wrote. "Academic and case studies of other states where restructuring has occurred are inconclusive with respect to the magnitude of the price change, its timing, and its direction. To the extent that charges for electricity decrease, state and local governments will experience lower electric bills. The converse is also true."

In order to appear on the November 2020 ballot, Citizens for Energy Choices needs more than 776,000 valid signatures, or 8% of the votes cast in the 2016 general election, for the proposal to be up for voting. The group must have its required signatures by Feb. 1, 2020.

FPL is a subsidiary of NextEra Energy Inc., Duke Energy Florida is a subsidiary of Duke Energy Corp. and Tampa Electric is a subsidiary of Emera Inc.