September 3, 2021

Podcast: Discussing Energy with Bruce May and Kevin Cox

Florida Capital Conversations Podcast Series

In the second episode of our "Florida Capital Conversations" podcast series, Partners Bruce May and Kevin Cox offer insights on Florida's energy industry, focusing on recent electric utility rate cases, the development of solar power projects and broadband deployment.

This Tallahassee-based podcast series takes a look at the many different aspects of state and local government through the lens of experienced legal professionals. Hosted by attorneys Nate Adams and Mia McKown, these candid conversations offer a seat at the table to everyone who listens.


Podcast Transcript

Mia McKown: Good afternoon everybody, it's Mia McKown and Nate Adams here again talking about some other issues going on in our state government that impact our Florida citizens. Today we're talking about energy, Nate, and how lucky are we to have Bruce May and Kevin Cox to talk to us about energy, what's going on day to day, how it impacts our lives and maybe even give us a forecast of what they see might be coming up in the legislative. Bruce, Kevin, welcome.

Kevin Cox: Thank you Mia.

Bruce May: Glad to be here.

Introducing Bruce May and Kevin Cox, Plus Hot Topics in Florida Energy

Mia McKown: I guess to get us started, it seems like our country's energy system has a significant impact on our economy. I think we can all agree that we have seen the increase in price and our electric bill. I know I have definitely seen it when I've gone to the pump. So there always seems to be a lot of interest in energy issues, especially when it hits our pocketbook. Can you describe your background in the energy sector and what areas you guys play in?

Bruce May: I've practiced in the energy law sector for, gosh, over 35 years, primarily in Florida, on electricity and natural gas matters, but both of those industries are essentially utility industries and both are heavily regulated by the Florida Public Service Commission. So most of our work is before that agency, which is called fondly the PSC. My experience includes, Mia, formal administrative hearings on electric and natural gas rates, administration rule-makings on energy policy, traditional power plant development, solar energy development, utility service, territory disputes, and electric and natural gas contract negotiations. I also work on legislative matters from time to time involving the state's energy policy. While most of the electricity and natural gas issues that I work on are resolved at the PSC level, unfortunately some disputes are not, which means litigation. My partner Kevin Cox works closely with me on energy matters, and Kevin handles litigation of those issues. So Kevin, why don't you share a little bit about your background?

Kevin Cox: Sure, thanks Bruce. And as Bruce noted, I spend my time in the litigation sector and do a few of the things other than utilities. But the utilities and industry sectors are so interesting because, as Mia, you note, it really makes a difference to everybody, and at the same time, there's just a bedrock of law that's been developed over the years. At the same time, it's meeting an oncoming wave of emerging technologies and interconnectedness and other issues that are constantly forcing the industry to look at itself and figure out how regulation is going to work. And those issues do sometimes come up to, whether it be the state circuit court, and it could be all the way up to the Florida Supreme Court, appeals from the PSC on electric and gas matters or appeal directly to the Florida Supreme Court. Sometimes we deal with these issues in federal court, and sometimes we deal with these issues in the division of administrating, administrative hearings as well. There's a lot of different ways that questions of law, interesting questions of law that ultimately affect all Floridians, get resolved both in the PSC as well as sometimes, as Bruce noted, through litigation in other forums.

Nate Adams: Bruce and Kevin, what are some of the more immediate energy issues that Floridians should be aware of?

Bruce May: There's just there's a myriad of issues in the energy sector, which I think most Florida citizens would be interested in. Several issues stand out from my perspective. There's the recent electric utility rate cases, and then there's a very interesting evolving issue involving the electrification of our state's transportation system. Kevin, do you have any other thoughts in that area?

Kevin Cox: I mean, I think some others that would be worth kind of talking about are the development of solar power projects — and renewable energy certainly a key part of the discussion these days — as well as broadband deployment, which you might not traditionally think of as an energy issue, but is in many ways related.

What Is the Florida Public Service Commission, and What Are Utility Rate Cases?

Nate Adams: Well, so electricity and broadband development and state transportation. What do you mean by an electric utility rate case?

Mia McKown: And also in that same vein, y'all talk a lot about the Public Service Commission. I know enough about that to be dangerous. How does all of that interrelate? Like, who is the Public Service Commission, and how does that all relate to what Nate said — I agree — about these utility rate cases?

Bruce May: The Florida Public Service Commission is actually an agency of the legislature. It's unique in that respect. It's not an executive branch agency. So it's reliant on legislative funding, and it takes many of its directives from the legislature itself as opposed to the executive branch. It's comprised of five individuals who are designated by the Florida Public Service Commission Nominating Council, and then they're appointed by the government. The Public Service Commission regulates investor-owned utilities. Investor-owned utilities are different from municipal utilities in that by "investor-owned utilities," I mean they're publicly owned by publicly traded stock. And those companies would be Florida Power & Light, Duke Energy, CAP Electric Company and Gulf Power. That gives you kind of some background, and when we use "PSC," that's who we're referring to.

Mia McKown: I think you talked about the utility rate case. What was interesting about that?

Bruce May: The rates charged by the Florida investor-owned utilities are periodically reviewed and are really closely regulated by the Florida Public Service Commission in formal administrative hearings. And we call those administrative hearings rate cases. Typically, the utility puts on a witness, the witness is sworn and then provides testimony justifying why the utility is charging certain rates at certain levels to certain people. And that proceeding is contested. In many cases, it's a disputed administrative proceeding. And the stakeholders would be the Office of Public Counsel, who typically represents the residential ratepayers, there's the Industrial Power Users Group, which represents the large industrial users, then the Florida Retail Federation also plays a role. They represent a lot of the commercial customers. The reason I wanted to identify that is because all of the major investment utilities — Duke, Tampa Electric Company, and Florida Power & Light and Gulf Power — have recently either undergone a rate case or they're in the midst of one now.

Mia McKown: So when we get our bill, it's not just the companies necessarily setting the rate. What you're saying is that there's a process that goes through kind of a check and balance as to what the companies are doing?

Bruce May: Yeah, an electric utility or any other regulated utility in Florida — could be a gas, water or wastewater, or electric — they can only charge rates that are approved by the Public Service Commission. And those rates have to be, quote, "cost based." And that's what a rate case is.

Essentially, the utility has to come in and say, "These are the costs of me providing you the service, and this is why these costs are reasonable." And the Public Service Commission closely reviews the reasonableness of the cost incurred as well as the prudency of the utility's actions.

And Florida Power & Light is in the midst of that right now. Earlier this month, they announced that — Florida Power & Light announced that — it had reached a settlement with some of the stakeholders in resolving its rate case. And one of the key issues in that rate case is Florida Power & Light recently acquired Gulf Power. And Gulf Power served the northwest corner around the Pensacola area, extending over the Florida Panhandle over close to the Apalachicola River. Florida Power & Light has historically served southeast Florida. By FPL acquiring Gulf Power, Florida Power & Light is now going to serve the peninsular Florida and the southeast as well as northwest Florida through Gulf Power. So that's going to be a key issue in the rate case — how those two utilities, Florida Power & Light and Gulf Power, will be consolidated to coordinate. So a lot of a lot of businesses are looking closely at that issue right now.

Electrifying State Transportation: Deployment of EV Charging Stations

Nate Adams: Bruce, you also mentioned the idea of the state transportation system being electrified. Tell us a little bit about that.

Bruce May: A lot of people think that the state's transportation system is regulated by the Florida Department of Transportation. And that's true in a very general sense. But in 2020, the Florida Legislature passed a law, which is codified in Section 339.287 of Florida Statutes. And that new law directs the PSC to assist the Florida Department of Transportation in developing a very wide-ranging master plan for electrical vehicle charging station infrastructure along the state's highway system. And so the Public Service Commission is playing a role in that regard, in that it's primarily responsible for projecting the increase in the use of electrical vehicles over the next 20 years. The Public Service Commission is also charged with maintaining or ensuring that there is an adequate supply of charging stations to support and encourage the deployment of these charging stations throughout Florida. One of the big issues in EV, or electrical vehicle, in that sector is range. A lot of people feel very comfortable in plugging in their car in their garage and driving around town to Publix or to the movies or whatever we used to do before COVID. But the real issue becomes, the studies show that people are reluctant to use electrical vehicles to travel far distances — to go to Jacksonville, Atlanta, Pensacola, Miami.

So what the state is trying to do is to encourage the deployment of these charging stations along the highway system to alleviate that concern and again, encourage the deployment and growth of electrical vehicles. And the Public Service Commission is playing a very large role in that.

The law provides for the investor-owned electric utilities to actually own and operate charging stations. They provide the electricity, they supply the electricity to these charging stations, but they also will compete with other electrical charging companies. So the Florida law was drafted in a way where that competition has to be competitively neutral, and so that a lot of folks are really looking at this when you have the larger utilities getting involved in the actual retail provision of electrical charging services. So that's going to be kind of an issue that I think a lot of folks are going to be watching closely as this thing evolves.

Solar Power in the Sunshine State

Mia McKown: Along the lines, too, we keep talking about alternate energy, it seems, what are some of the key issues with solar power? I mean, here we are in the Sunshine State, right? You would think solar power would be a lot more prominent than it is. What are, you have any thoughts or can give us some insight on where Florida is going in the area of solar energy?

Bruce May: Florida is making great strides in the solar energy area. Historically solar power generation was focused more on the rooftop solar PV systems where people put solar panels on the roof. That certainly is continuing to grow. But the scale of residential rooftop solar is, it pales in comparison of what I believe the state needs.

The state really needs significant, utility-type scale projects to provide solar power in meaningful quantities.

So that's really kind of what's happening. You see solar power being developed on two fronts. One, there's the solar PV systems, rooftop, what we call rooftop solar, and that's doing well. That's driven primarily by the utilities' net metering tariffs, which all electric utilities are required to have under law. Net metering is essentially a billing mechanism that allows electric utility customers with solar panels to receive a credit on their electrical bill for the electricity they actually add to the grid. And how investor-owned electric utilities calculate and administer those solar credits can be contentious, and the Public Service Commission typically resolves those contentious issues either through rule-making or through administrative hearings. The other area of solar power development is really what's taken on in a larger scale, no pun intended, is the utility-scale solar development. And that's, all of the Florida investor-owned utilities — Florida Power & Light, Duke, Gulf Power and Tampa Electric Company — have made significant investment in what we call utility-scale solar power plants. Municipal electric and Jacksonville Electric have also made that type of investment too. You're seeing that play out now in the legislature. While most people are in favor of solar farms, some people don't like the farms to be located in their backyard or next to them. And you have that NIMBY kind of phenomenon that has developed. Several large power solar power plants have faced local permitting challenges, which have prompted the Florida Legislature to pass a law last session, Senate Bill 896, which in many instances limits — and, some would say, preempts — local governments from deciding whether or not solar facilities should be granted. And whenever the legislature preempts a local government, that typically evokes a response, sometimes litigation. And Kevin, you might want to add.

Kevin Cox: Yeah, Bruce. I tend to agree. I mean, that preemption issue is the sort of thing that could easily get pushed into a litigation phase. And it kind of echoes what we were talking about earlier. I mean, you've got some bedrock principles of law that seem stable, but when you've got questions regarding these new technologies and new initiatives that become available in the energy sector, oftentimes you have to revisit and litigate the disputes that arise out of that. So it is an interesting issue, and I'm sure it will not be the last in terms of the evolving energy sources, especially in the renewable sector.

Broadband Deployment: Intersection of Telecommunication and Electric Industries  

Nate Adams: Earlier you mentioned broadband deployment, which strikes me as a telecommunications issue. How does that relate to energy?

Kevin Cox: This is an issue that that COVID and the challenges of working remotely and learning remotely have really accelerated to the forefront, so I'm curious to hear your thoughts on that too.

Bruce May: The pandemic really has shown how important it is for our workforce and our educational systems to have a reliable access to high speed internet service, and the deployment of broadband internet service is really a very big issue. Every state is grappling with it, our nation, the U.S. Congress, Senate. It's an issue that is at the forefront. And there is a national debate on whether and under what terms and conditions a broadband internet company should be able to attach its facilities to the poles of electric utilities in order to deploy broadband. Historically, most of those pole attachment issues where the telecommunications broadband industries have interconnected or dissected the electric utility industry, most of those issues have been decided by the Federal Communications Commission. However, last session the Florida Legislature passed Senate Bill 1944, which requires the Public Service Commission to regulate pole attachment rates that an investor-owned utility may charge a broadband internet company for the use of the utility poles. The Public Service Commission is currently proposing rules to implement that law. So that is going to be closely watched and actively monitored by all of the stakeholders, the broadband companies and the electric utilities.

Mia McKown: Yeah, that's a big issue, even with the placement in the cities. They had, I think, legislation maybe two sessions ago dealing with what, how municipalities cannot prevent these poles coming up because it's so needed for access. So that definitely is an interesting issue, something that we would have never thought about 10 years ago for sure.

Bruce May: It's interesting how the two industries — kind of the telecommunications, broadband industries and the electric industries — have kind of come together on this. You mentioned the municipal utilities. Actually, the law was passed last session, it's House Bill 1239. It's called the Florida Broadband Deployment Act, and it's a very wide-ranging bill that does a lot of things. But part of the new law requires municipal utilities, electric utilities, to allow broadband internet companies to attach their facilities to the municipal utilities' distribution poles for $1 per year. And that's in place for, I think, three or four years. But it is a dictated, governmentally directed rate cap that municipalities can charge the broadband companies for the use of the poles. It was a very hotly debated law, and how it evolves and whether it will resurface again this session is something a lot of folks are looking at.

Nate Adams: All right guys, well, really interesting conversation today, energy impacting not just our lights, the things we're used to, but telecommunications, transportation, reaching out across all sectors of Florida's economy today. Thanks to both Bruce and Kevin and also my partner Mia McKown, and we'll look forward to seeing you back here when we bring on another topic of relevance to law and policy in the state of Florida.

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