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State economists having tough time pricing energy deregulation

“There’s no way we put a number on this.”

The state’s top economists sat down Monday to figure out what deregulating Florida’s energy market would have on state and local tax receipts.

They didn’t get far, given how little is known about what deregulation would mean for electric and gas rates, the value of utilities’ assets, and how the Legislature would structure a new system.

“There’s no way we put a number on this,” Amy Baker, coordinator for the Office of Economic and Demographic Research, said during a discussion of property taxes.

It was the third of a planned four hearings into the fiscal ramifications of a proposed constitutional amendment for the 2020 ballot that would grant power company customers the right to choose their providers.

It seemed clear that deregulation would drive down the value of utility property, Baker said. But would investments in new infrastructure offset those losses?

Would the Legislature help defray the cost to utilities of assets they would no longer control? How would it make up for any loss of revenues needed to run the state?

“To me, what the Legislature does with these revenue sources is completely unknowable at this point,” said Don Langston, staff director of the House Ways & Means Committee.

“But I don’t think it’s a reasonable assumption that they’re just going to let these things go and not change current law in any way,” he added.

“These are all very important revenue sources for state and local government. I can’t imagine the Legislature just not doing anything in the implementing of it.”

Still, he said, “to me, for the most part, we’re talking indeterminate impacts.”

Representatives of the Senate and the Governor’s Office also serve on the panel scrutinizing the proposed amendment, which has the unwieldy title, “Right to Competitive Energy Market for Customers of Investor-Owned Utilities; Allowing Energy Choice.”

Investor-owned utilities would be limited to construction, operation, and repair of transmission and distribution systems, while municipal and cooperative utilities could opt in or out.

Critics — including Florida’s investor-owned utilities, which basically operate as monopolies in their service areas under Public Service Commission scrutiny — argue the measure would create a chaotic energy market, with brownouts and unstable prices.

A utilities-sponsored study concluded that the power companies would be left with $10 billion in stranded costs — representing investments in power plants, gas pipelines, and other infrastructure they would no longer control.

“Propaganda,” Infinite Energy CEO Rich Blaser said Monday, dismissing such concerns.

Competition, he argued, promotes lower rates and investments in green energy. His company sells energy in the wholesale and retail markets.

The switch also garnered an endorsement from Wal-Mart, which would like to operate its own energy services, and former Federal Energy Regulatory Commissioner Jon Wellinghoff, now CEO of GridPolicy Consulting. He suggested that ratepayers could save as much as $1.4 billion under deregulation.

Written By

Michael Moline is a former assistant managing editor of The National Law Journal and managing editor of the San Francisco Daily Journal. Previously, he reported on politics and the courts in Tallahassee for United Press International. He is a graduate of Florida State University, where he served as editor of the Florida Flambeau. His family’s roots in Jackson County date back many generations.

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