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Fla. court dismisses retail competition ballot challenge, but hurdles remain


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Essential Energy Insights - October 2021

Fla. court dismisses retail competition ballot challenge, but hurdles remain

Florida's Supreme Court dismissed a petition from the state attorney general designed to halt a referendum on electric competition in the state, a change that might have wholesale market implications.

Legal hurdles remain, however, before Floridians can vote on the matter.

Introducing competition to Florida's electricity sector "could spur on more renewable developments, if consumers are able to choose 100% renewable plants, and that forces the [retail electricity providers] to procure more than they currently have," University of Texas Energy Institute research associate Joshua Rhodes said Dec. 24.

The ballot title for the proposed new Article X of the Florida Constitution, proposed for Nov. 3, 2020, is "Right to Competitive Energy Market for Customers of Investor-Owned Utilities; Allowing Energy Choice."

The amendment's proposed actions include the following:

* The state's policy is to be "that its wholesale and retail electricity markets be fully competitive so that electricity customers are afforded meaningful choices among a wide variety of competing electricity providers."

* Only customers of investor-owned utilities would automatically be eligible to choose among retail power providers, but electric cooperatives and municipal utilities could opt to allow retail power competition in their areas.

* Investor-owned utilities could only own transmission and distribution facilities, while generation and retail services would be provided through competition, which would be safeguarded by an independent market monitor.

* The state Legislature would be required to adopt by June 1, 2023, "complete and comprehensive legislation to implement" the new law, so that it would take effect no later than June 1, 2025. If the Legislature does not act by June 1, 2023, any Florida citizen could seek a court order to compel the Legislature to comply with the new amendment.

Jurisdiction issues

On Dec. 19, the Florida Supreme Court dismissed Florida Attorney General Ashley Moody's request for an advisory opinion on whether a financial impact statement corresponding to the ballot proposal met legal requirements (Docket No. SC19-479). The reason, the court said, was that it lacks jurisdiction.

The Florida Legislature's Office of Economic and Demographic Research had previously declined to update its findings, issued in March, on what would happen if Florida opened its wholesale and retail electricity markets to competition and redesigned a new electricity market system. Moody, who opposes the ballot effort, also in March asked the court to determine if the proposed ballot question was legally sound.

"There will be significant costs to state and local governments to transition to a fully operational system," the legislative office said in the March report. "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."

The court determined, however, that as the validity of a referendum petition does not depend on its financial impact statement, the court had no jurisdiction to judge the validity of such statements, "because we cannot exercise jurisdiction that the constitution does not provide."

Nevertheless, the question of whether the petition for the competitive electricity market referendum meets legal requirements remains undecided by the state Supreme Court, Timothy Fox, vice president and research analyst at the ClearView Energy Partners consultancy, said in an email Dec. 24.

Ballot language

The Florida Supreme Court heard oral arguments in August regarding whether the ballot wording meets the "single subject" rule for ballot initiatives but has not yet issued a ruling. (Docket No. SC19-328)

During oral arguments, judges gave Fox the impression that four of the seven members "questioned whether the [ballot] summary sufficiently explains to voters that the proposed amendment would prohibit IOU customers from continuing to rely on their current IOU to provide retail services," according to an Aug. 29 ClearView Energy Partners note to investors.

"Our observations during oral argument suggest that at least five of the seven justices may believe the proposed summary is misleading or otherwise faulty and therefore ineligible to go before the voters," the note states. "As such, we assign better-than-even odds to the prospect that the court invalidates and strikes the proposed amendment from the ballot."

But if the initiative makes it onto the ballot, it would face "an uphill climb," ClearView said, partly because Florida's retail electricity rates, according to the U.S. Energy Information Administration, have been below the national average, and "voters may be wary of upsetting the status quo."

The EIA's data for 2018, the latest year with complete information, shows Florida's overall average electric rate as 10.31 cents/kWh, below the national average of 10.53 cents/kWh. Florida's rate is also below the rates of 11 of the 17 states that now have retail electric competition.

Mark Watson is a reporter for S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.