Citizens of the State of Florida v. Art Graham, etc.
191 So. 3d 897
| Fla. | 2016Background
- FPL sought PSC approval in a 2014 fuel-clause proceeding to recover costs (including a return on investment) for its Woodford Project: a joint venture with PetroQuest to acquire, explore, drill, and produce natural gas in the Woodford Shale (Oklahoma).
- FPL characterized the Woodford Project as a long-term physical hedge intended to supply gas at production cost and reduce customer exposure to market price volatility.
- Citizens (Office of Public Counsel), FIPUG, and FRF intervened and challenged PSC jurisdiction to allow rate recovery of the Project’s capital and operating costs through the fuel clause.
- The PSC approved recovery through the fuel clause, finding the Project would produce customer benefits and act as a long-term physical hedge, subject to accounting and audit conditions.
- The Florida Supreme Court reviewed whether the PSC exceeded its statutory authority by allowing recovery of exploration and production investments and a return on capital through rates.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether PSC has statutory authority to allow rate recovery for FPL’s investment in out-of-state gas exploration/production | Citizens: PSC lacks statutory authority; fuel clause recovery limited to costs tied to generation/transmission/distribution of electricity | PSC/FPL: fuel-clause authority extends to hedging and other fuel-related costs that produce fuel savings; Project is a long-term physical hedge | Reversed — PSC exceeded its statutory authority; exploration/production investments fall outside PSC ratemaking authority for electric utilities |
| Whether the Woodford Project can be characterized as a long-term physical hedge | Citizens: Project is speculative, uncertain, not a physical hedge (unknown quantity/price; ratepayers bear production risk) | PSC/FPL: Project decouples costs from market prices, provides predictable production-cost-based fuel and reduces volatility over long term | Court: Project is not a hedge for fuel-clause purposes; too speculative and not a pass-through fuel cost |
| Whether ratepayers may be required to guarantee speculative capital investments and allow utility return on such capital via fuel clause | Citizens: Allowing recovery forces ratepayers to guarantee capital investment and bear production/price risk without legislative authorization | PSC/FPL: PSC has broad discretion to approve fuel-related investments that yield projected fuel savings and utilities can earn a return on capital where authorized | Court: Recovery of capital investment and return via fuel clause requires legislative authorization; PSC overreached |
| Standard of review and deference to PSC factual findings | PSC/FPL: PSC’s factual findings on hedging and projected savings are supported by record and entitled to deference | Citizens: Legal question of statutory authority is reviewed de novo; PSC cannot act beyond legislative grant | Court: Legal question of authority reviewed de novo; statutory text limits PSC—thus PSC exceeded authority (although dissent argued deference to PSC on factual findings) |
Key Cases Cited
- United Tel. Co. of Fla. v. Pub. Serv. Comm’n, 496 So.2d 116 (Fla. 1986) (agency derives authority from legislature; courts review whether commission acted within statutory grant)
- Gulf Power Co. v. Fla. Publ. Serv. Comm’n, 487 So.2d 1036 (Fla. 1986) (fuel adjustment clause purpose and pass-through nature of fuel charges)
- Citizens of State v. Pub. Serv. Comm’n, 425 So.2d 534 (Fla. 1982) (PSC’s duty to fix fair, just, and reasonable rates and breadth of delegated authority)
- D’Angelo v. Fitzmaurice, 863 So.2d 311 (Fla. 2003) (legal questions reviewed de novo)
- Hawkins v. Ford Motor Co., 748 So.2d 993 (Fla. 1999) (court cannot rewrite statutes beyond their plain language)