Due diligence by GRU could have prevented FPL debacle

BY JENNIFER CABRERA

After urging the Gainesville City Commission on January 16 to give him authority to negotiate a 30-year transmission line deal with Florida Power & Light (FPL), Gainesville Regional Utilities’ (GRU) General Manager Ed Bielarski suddenly reversed course on January 24, sending  an email to City Commissioners and the Utility Advisory Board stating that he was “pausing” the proposed deal.

On January 31, Bielarski issued a white paper called “GRU Crossing the Rubicon: A New Course of Action,” which re-stated many of the arguments he originally made in favor of the 30-year agreement with FPL. The paper states, “On Jan. 24, during the course of continuing due diligence on the framework of the agreement, our communications with representatives of FPL resulted in the discovery that FPL had updated its 2019 FERC Open Access Transmission Tariff (OATT) rates (which drive the initial fee under the NSA) from $2.10 per kilowatt-month to $2.32 per kilowatt-month, to reflect its 2020 projections.”

Bielarski then states, “In addition to adding an increased financial cost to the NSA, FPL has inadvertently created distrust with the public as to their viability as a partner while also giving GRU another bargaining strategy.” He adds, “FPL’s representatives failed to disclose that the utility had made any true-up calculations and submitted them to FERC until Jan. 24, when FPL representatives informed GRU that they had updated their 2019 filing with actual November and December 2019 numbers to reflect costs of $2.32 per kilowatt-month.”

This slide is part of a presentation dated January 24 that appears to have originated with Matt Pawlowski of FPL:

Assuming Bielarski is being truthful when he says he first learned about the higher tariff rate, it’s worth exploring whether he should have known about this rate before taking the deal to the City Commission.

In just a few days of research, we have constructed the following timeline:

August 13, 2019: FPL sent a letter to the Federal Energy Regulatory Commission (FERC), requesting a “formula rate,” which would replace their periodical rate filings with an annual adjustment, effective November 1, 2019. The projected rate in that letter for November-December 2019 was $2.10/kW-month. 

September 3, 2019: FPL posted a spreadsheet on the public OASIS website that proposed a tariff rate of $2.36/kW-month for 2020. 

This email confirms that the spreadsheet was actually posted to OASIS on September 3:

October 9, 2019: FPL posted a spreadsheet on the OASIS website that revised the proposed 2020 tariff to $2.32.

The evidence is clear that all of this information had already been public for months when Bielarski told the City Commission (with FPL’s Matt Pawlowski standing beside him and nodding) that he expected the proposed tariff rate of $2.10/kW-month to be negotiated to $1.95/kW-month. Pawlowski also stated that FPL had only increased tariff rates twice, in “2004 or 2005,” and then in 2011. The implication was that rates don’t change often, but both Bielarski and Pawlowski should have known that FPL has applied for a formula rate with an annual adjustment.

Bielarski’s new white paper also states, “The update of FPL’s rate request, which reflects greater than a 10 percent year-over-year increase… is concerning, largely due to the request to use a formula rate.” Again, this is information that was publicly available as early as August 13, 2019, with the specific 2020 rate publicly available as of September 3, 2019. 

Bielarski also failed to mention (or failed to uncover in his due diligence) that the Florida Municipal Power Association, Seminole Electric Cooperative, Tampa Electric Company, and Orlando Utilities Commission have all intervened in the FERC rate case to contest the rates. This creates a great deal of uncertainty around the projected rates.

We asked FPL for comment on Bielarski’s statement that FPL has “created distrust” and received this from FPL Spokesperson Brian Orlove: “We understand the concerns of GRU regarding the initial network service agreement that Florida Power & Light Company proposed. We are working with GRU to move forward with the proposal that is acceptable with the utility and its customers.

“We still believe that this is a beneficial solution to GRU and its customers to address its clean energy goals and become more energy efficient. The network service agreement would provide GRU access to the largest transmission network in the state. This expanded access has the potential to save GRU’s customers millions of dollars in fuel costs by providing them with reliable power generated from one of the cleanest power plant fleets in the country.”

GRU and Bielarski have not responded to any of our questions.