FPL seeks approval for gas field investment

Market: Electricity, Natural gas
27/06/14

Florida Power & Light (FPL) is betting that an investment in an Oklahoma natural gas field will cut its fuel costs, saving its customers up to $107mn on their electricity bills.

The electric utility is seeking approval from state regulators in Florida to spend an estimated $191mn to jointly develop up to 38 natural gas wells in southeastern Oklahoma's Woodford shale natural gas field and recover those costs from its customers.

US independent oil and gas producer PetroQuest Energy will drill and operate those gas wells and provide a portion of the output to FPL. The deal would allow the utility to lock in gas prices at production costs rather than relying on market costs, which can be volatile, FPL said in the petition submitted to the Florida Public Service Commission, which regulates utilities in the state.

The move by FPL, the largest regulated electricity provider in Florida, underscores its increasing dependency on natural gas as a source fuel for power generation. The utility demolished three oil-fired power plants over the last five years and has replaced them with new natural gas-fired units. Those new plants will allow FPL to reduce harmful emissions and to take advantage of low-cost gas supplies resulting from the boom in US shale production, according to the petition.

The investment in gas production is "the next logical step in providing clean electricity to our customers at affordable prices," said FPL chief executive Eric Silagy.

The utility's investment in the Woodford shale would provide just a fraction of the gas FPL purchases to operate its plants. FPL can buy up to 2 Bcf/d (57mn m³/d) of gas. But FPL is also seeking approval from the state regulators for guidelines that would allow it to make future investments in gas production without seeking commission approval for each project.

FPL said it expects the Commission to reach a decision on its proposal by the end of this year.

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