NextEra Energy (NYSE:NEE) utility Florida Power & Light (FPL) took a step toward securing a long-term fuel supply for its growing fleet of natural gas-fueled power plants on Oct. 24.
The Florida Public Service Commission announced it has approved the prudence for FPL contracts for a planned 600-mile natural gas pipeline system.
The pipeline—a $3.5bn project—will join Florida’s two existing pipelines, the larger one owned by Florida Gas Transmission, and the other owned by Gulfstream Natural Gas System.
Florida uses more natural gas to generate electricity than any U.S. state other than Texas, but it has minimal production, no storage capabilities and only two major pipeline systems available to transport natural gas to the peninsula, FPL has said.
FPL expects natural gas generation to be 65%-67% of total generation for the coming years.
“The Commission had already determined that additional gas capacity was necessary to meet the growing electricity needs of Floridians,” said PSC Chairman Ronald A. Brisé. “Today’s approval of FPL’s investment in natural gas infrastructure will benefit all Floridians by securing the state’s energy sector,” Brisé added.
Expected to be in service by mid-2017, the pipeline will run from Southwest Alabama, through Georgia and down to Central and South Florida. The new pipeline system is also expected to help create jobs to support its construction.
FPL has entered into long-term natural gas transportation contracts with Sabal Trail Transmission and Florida Southeast Connection, which are projected to save up to $450m, compared to other options, over the term of the contracts. The PSC also decided that it will review the prudence of the actual transportation costs during its annual Cost Recovery Clause hearings.
FPL announced in July that it had selected the Sabal Trail proposal. Sabal Trail Transmission is a joint venture of Spectra Energy (NYSE:SE) and NextEra Energy. Florida Southeast Connection is a wholly owned subsidiary of NextEra.
The Sabal Trail pipeline will be capable of transporting up to 1 billion cubic feet of natural gas per day, according to the Sabal Trail website. Sabal Trail has already begun the process of obtaining necessary regulatory authorization from the Federal Energy Regulatory Commission (FERC).
To connect with FPL’s operations, Florida Southeast Connection will invest approximately $550m to construct a separate pipeline from Sabal Trail’s Central Florida Hub to FPL’s Martin Clean Energy Center in Indiantown, Fla.
No written order has been filed yet in connection with the PSC’s Oct. 24 action, said a PSC spokesperson.
In July FPL said that the system improvements could also allow the utility improved access to shale gas assets while decreasing Florida reliance on declining gas production from the Gulf of Mexico. The Gulf is also very prone to hurricanes during peak summer months.