A Florida Resident’s Case for Voting YES on Amendment 1

by Fred Smith



 

NO. 1 CONSTITUTIONAL AMENDMENT
ARTICLE X, SECTION 29

Rights of Electricity Consumers Regarding Solar Energy Choice

“This amendment establishes a right under Florida's constitution for consumers to own or lease solar equipment installed on their property to generate electricity for their own use. State and local governments shall retain their abilities to protect consumer rights and public health, safety and welfare, and to ensure that consumers who do not choose to install solar are not required to subsidize the costs of backup power and electric grid access to those who do.”


I’m a Florida resident. Each month I begrudgingly pay my electric utility for the electricity my family uses. I don’t own or lease solar equipment, yet I believe in its potential as a clean and renewable energy source. I want solar to grow and have a prosperous future in my state, and I believe passing Amendment 1 this November is a key step toward that future. Here’s why…

Both opponents and proponents of Amendment 1 claim they want solar energy to flourish in Florida. Of course, they disagree vehemently on whether a yes or no vote on Amendment 1 will help or hurt solar’s future in the Sunshine State.

So who’s right?

I’ve read countless arguments on both sides, none of which I feel provide voters with a clear and objective understanding of what’s at stake with Amendment 1. This article aims to do just that.

For the past two years, I’ve worked closely with experts in the energy industry who’ve given me insights that most Florida citizens don’t have on the finer details of how energy travels from generation to consumption. What follows is my explanation of why I believe voting yes on Amendment 1 is the better choice for both solar’s future and for electricity consumers in Florida.

To really understand the crux of this amendment, we should take a step back and examine how other states pushing for solar growth have dealt with the same issues Amendment 1 seeks to resolve. Before we do that, however, we have to understand how Florida’s energy market is structured.  


What type of energy market do we have here in Florida?
 
If you said a monopoly dominated by profit-hungry utilities, then you’re probably against Amendment 1. If you said, however, that Florida is a regulated energy market in which vertically integrated utilities control power from its generation to consumers’ meters, not only are you correct but you’re probably in favor of Amendment 1.  

Opponents of Amendment 1 repeatedly misstate the fundamental nature of Florida’s regulated energy market with the crucial points of their arguments, resulting in a well-intentioned platform that may do more harm for solar’s future than good.

The key to understanding Amendment 1 relies on knowing how Florida’s energy market is structured and what role utilities play in the market.  

Electric Utilities in Florida are highly regulated to keep them from acting like monopolies.

Amendment 1 is supported by Florida’s biggest utilities, a fact opponents tout as proof the bill is part of utilities’ agenda “to protect their monopoly markets and limit customer-owned solar.” Calling utilities monopolies, as opponents of Amendment 1 repeatedly do, shows a key misunderstanding of how Florida’s energy market is structured.

Florida operates a regulated energy market. The power you consume in Florida is controlled from the power plant to the meter on your home by a vertically integrated utility, who sends you an electric bill each month that reflects your levels of consumption.

 

Floridians don’t get to choose their utility or their supplier of electricity, a point that often leads to utilities being labeled as monopolies by frustrated consumers.  Utilities in regulated markets are granted franchise rights by the state to be the sole provider of electricity in a geographic area. This serves to ensure consistent and reliable service to customers. It also ensures a level of financial success for the utility.

The laws that regulate utilities in the Sunshine State cap the percentage of profits utilities are allowed to make. Florida’s Public Service Commission regulates retail electricity prices to ensure utilities do not overcharge consumers due to lack of competition and high demand for electricity. Simply put, in a regulated market utilities are the ones who are regulated so they can’t act as monopolies.

To better understand a regulated market like we have in Florida, we should consider how a deregulated market works. Deregulated markets feature grid operators that administer wholesale markets to ensure reliability on the grid and prevent blackouts.

In a deregulated market, the utility is also a granted a franchise right to provide electricity to customers and bill them monthly. However, in a deregulated market the utility has no control over the supply of electricity. Instead, utilities divest all ownership in generation and transmission of electricity and are only responsible for the distribution of electricity to consumers and for billing those same consumers.

Deregulated energy markets are often called open or competitive because they promote choice and free market enterprise to provide consumers with electricity prices that are fair and just.

 

In a deregulated market, the consumers are allowed to choose their commodity supplier. The structure of the market motivates retailers to differentiate their products from the utility’s and those of competitors by developing innovative features, pricing plans, and options that are not available in regulated markets.

 

There are six deregulated markets in the US.

Why isn’t Florida in a deregulated  energy market?

Imagine if your home’s street had multiple utilities competing for business. Multiple sets of electric poles and wires would crowd your neighborhood and competing proprietary metering equipment would vary from house to house. If any one utility left the area in pursuit of greener business pastures the poles, wires, and meters would remain and the customers of the vacated utility would be out of power until each selected and contacted with a replacement utility.  

When the electric grid in America was initially constructed in the early 20th century, the same type of vertically integrated system as we have in Florida today was established to ensure safe and reliable electric service didn’t include unsightly and dangerous messes of competing proprietary equipment littering the streets of an expanding America.

The safe and reliable distribution of electricity to homes and businesses is a responsibility that was deemed too important to our American society to be subjected to the ups and downs of pure free market capitalism. The sentiment remains today. That’s why utilities in both deregulated and regulated markets are subject to a wealth of laws that aim to ensure their continued success in delivering safe and reliable electric service, while limiting their otherwise apparent ability to act like monopolies.

In the 1990’s, six deregulated energy markets emerged in the US. Florida remained regulated as did all of the southern states, the Pacific Northwest and much of the Midwest and Southwest.       

If you’re wondering if Florida would be better off in a deregulated market consider this:
The competition permitted in a deregulated market doesn’t guarantee consumers will pay lower rates for electricity compared to consumers in a regulated market.

Among California, Texas, and New York—three states of comparable size to Florida who are in deregulated markets—only Texas energy consumers paid less per kilowatt hour of electricity than Florida in 2015.

In 2015, Florida energy consumers paid less on average per kilowatt hour than 14 states in deregulated markets. Among the top 20 US states that paid the lowest per kilowatt on average in 2015, 14 operate regulated markets.

Only utilities are legally permitted to sell electricity in a regulated market.

Amendment 1 guarantees customers the right to own and lease solar equipment for the purpose of producing electricity. What Amendment 1 does NOT allow is for customers to generate their own electricity and sell it to consumers as third parties. Opponents of the amendment see it as a road block to solar-producing companies other than utilities selling solar power to willing consumers, a scenario they see as a “fair market solution.”

Third parties are not legally permitted to sell electricity in a regulated market. Whether Amendment 1 passes or not, that fact won’t change.

Many solar proponents in the Sunshine State, especially those who oppose Amendment 1, would love to see Florida implement solar farms like the ones recently approved in Massachusetts, which allow solar producing entities other than traditional utilities to sell solar generated electricity to consumers.

This scenario can occur in deregulated markets. Massachusetts is a part of a deregulated New England energy market whose grid is overseen by ISO-New England, a non profit entity tasked with preserving the balance of electricity’s supply and demand on the New England Grid.

But what has been voted into law in Massachusetts can’t happen in a regulated energy market, which is structured so that only the utilities—who have endured rigorous safety regulation—can sell energy to customers.

Opponents of Amendment 1 cling to the point that without competition utilities will thwart solar’s growth in Florida for their own revenue-generating benefit.

Perhaps the rage that fuels the opposition’s fight against Amendment 1 would be better suited fighting to change Florida’s entire energy market structure. Although, we’ve already discussed how consumers in deregulated markets don’t always enjoy cheaper electricity than consumers in regulated markets.  

Regardless, what’s at stake with Amendment 1’s vote has nothing to do with Florida’s utilities trying to maintain marketshare.
 

Utilities support this Amendment and have spent more than $20 million to see that it passes. Why?

Across America, utilities aren't particularly liked by consumers.

Here in Florida, we really dislike them. So when we see the big money utilities are throwing at this amendment, it’s only natural to wonder if something is afoul. Consumers just don't trust our electric utilities, especially in Florida where we serve a life sentence with them with no chance for parole.

Utilities, for the most part, know where they stand in the minds of most consumers. That's why their preferred method of progress is to raise money and lobby the government as opposed to running public relations and community outreach to mend the relationship they have with consumers.

It's understandable why the opposition to Amendment 1 is urging voters to "follow the money" and learn the truth. The hope with this kind of education tactic is that the opposition can grow its base by tapping into Florida residents’ distrust of utilities.

There is much more truth to understand in order to make a voting decision that won't derail solar's future in Florida before it really has a chance to begin. Amendment 1 isn’t about utilities protecting their marketshare. It’s about protecting consumers, whether they choose to go solar or not. 
        

Amendment 1 will not affect solar customers' lawful right to sell excess electricity back to the utility.

Solar customers are connected to the grid. When the sun goes down, solar customers continue to consume power distributed from the grid. In the language of Amendment 1, this is called back up power. It refers to the power solar customers draw from the grid during the times of the day when they are unable to generate electricity from their solar equipment.

One of the benefits of solar is the potential for customers to create more energy that they consume and sell that surplus back to the grid. This is a process called net metering and it exists as a safety measure—the kind utilities are mandated by law to provide.

Energy is not easily stored. When you generate it, you must use it immediately. Solar-generated energy that is unused by the solar customer has to go somewhere, otherwise the system that generated it is in danger. Enter net metering, a process that is mandated by law in both regulated and deregulated markets. Florida statute 366.91(6) requires utilities buy excess energy produced by solar customers.

Solar customers love net metering, and for good reason. It’s a way to potentially earn money. By selling energy back to the grid, solar customers can earn credits from the utility. Not only are they generating clean energy and saving money by not having to buy energy from the utility, but they’re also offsetting the cost of the energy they purchase from the grid (back up power) through what they earn thanks to net metering.

Amendment 1 supporters cry foul at any attempt to disrupt net metering, claiming that monopolistic utilities are trying to maintain their stranglehold on the energy revenue paid by consumers.

Amendment 1 does not involve net metering in any way. Whether the bill passes or not, net metering will continue to exist in Florida by law, allowing solar customers to sell excess generation back to the utility.

As we’ve discussed, the profits that utilities in Florida can make are capped at a defined percentage range so the TECOs, FP&Ls, and Dukes of the Sunshine State can’t act as monopolies.

Utilities in Florida may very well choose to invest in solar generation as they evolve their infrastructures to include cleaner energy sources. If they do, they have the legal right to sell that electricity to consumers. Their doing so, however, will in no way thwart Florida residents from owning or leasing their own solar equipment and using it to generate electricity for their own consumption. That right is currently guaranteed by Florida Statute 163.04 and will become constitutional law should Amendment 1 pass this November.

Whether Amendment 1 passes or not, solar customers will be able to sell their excess energy back to the utility, who must purchase it as mandated by Florida Statute 366.91(6). What solar customers can’t do today, nor will they be able to do in the future so long as Florida operates a regulated energy market, is sell energy as third parties.  
   

Amendment 1 seeks to solve the key issue that has halted solar’s growth across America.

We need only look at a handful of other states, many of which are in deregulated markets, to realize that lack of competition isn’t stopping solar’s growth. Consumers are.

When solar drastically penetrates an energy market, a shift in costs occurs that places a heavy burden on customers who chose not to install solar. In effect, solar customers are being subsidized by non-solar customers. Across the US, this shift in costs and the tenacious debate on how to handle it has halted solar expansion in its tracks.

At its core, Amendment 1 seeks to preemptively solve the problem by ensuring that non-solar customers “are not required to subsidize the costs of backup power and electric grid access” of solar customers.

This is what we’re really voting on in November. It’s worth repeating: state and local governments will ensure “that consumers who do not choose to install solar are not required to subsidize the costs of backup power and electric grid access to those who do.”  

This is the key to the amendment.

Ahmad Faruqui is an energy economist who has testified before energy commissions in 19 states. He’s advised eight governments and lectured on six continents. His areas of expertise include rate design, energy efficiency, distributed energy resources, advanced metering infrastructure, plug-in electric vehicles, energy storage, inter-fuel substitution, combined heat and power, microgrids, and demand forecasting.

In 2014 I interviewed Mr. Faruqui about the future of solar generation in the US. This is what he had to say about the problem that he felt had brought solar growth in the US to a point of inflection:

“Even when the sun goes down, solar customers are still consuming power. Where is that coming from? It’s coming from the grid—the grid being the wires, the transformers, the circuits, the feeders—all of that is still there even if you have solar on your roof. That currently is something that solar customers are not paying for. They’re essentially using the grid as a free battery. The issue is, the battery is not free. Someone has to pay for it.”

Mr. Faruqui continued to describe biggest problem he believes solar faces in America:

“The bill savings that solar customers get are really not coming from the utility, they’re coming from their neighbors. In large measure, this concept has created an inequity among customers. If you don’t have solar, you’re basically paying for the savings that the solar customer is getting. The bill reductions [for solar customers] are not real bill reductions. There is a cross subsidy going on. In a sense, it’s a tax on the [non-solar] neighbors. Every time one neighbor puts solar on their roof, they’re taxing the other neighbors…without them knowing about it. That was OK, when solar was small. But at some point, we have to level the playing field.”      

That was in 2014. Two years later, solar customers in just about every state with more advanced solar pursuits than Florida (which is just about every state with solar pursuits) have woken up to the inequity and are demanding the playing field be leveled.  

Other sunny states in the US are dealing with the conundrum brought about by cost shifting as solar has become increasingly ubiquitous. Nevada, Arizona, California, and Texas are just a few of the larger states with plenty of sun whose solar aspirations have hit a wall now that non-solar customers have realized en masse they’re paying higher costs as a result of their solar neighbors paying less.  

When it comes to solar penetration, the Sunshine State is at the back of the pack in the US—which means we can learn from the triumphs and missteps of our fellow states.

The real problem, unfortunately, is that none of the more advanced solar states have a definitive solution for cost shifting. Several of these states are exploring the possibility of intricate rate designs that aim to ensure fairness for solar and non-solar customers.

If Florida hopes for a solar future, the issue of cost-shifting must be met head-on. Amendment 1 is a crucial initial step because it would preemptively solve at the state’s constitutional level the problems cost shifting will inevitably stir in Florida.


Amendment 1’s language states exactly what the bill aims to accomplish.

It’s worth noting (again) that Florida statute 163.04 grants citizens the right to own and lease solar equipment and to generate their own electricity. Amendment 1 affirms those rights and guarantees them in the Florida’s constitution.

It’s also worth noting that state and local governments are currently tasked with protecting consumer rights and public health, safety and welfare. Amendment 1 also affirms this truth.

Opponents of Amendment 1 assert the language of the bill is an attempt to deceive and sound pro-solar, when it’s not. They often point to two sets of circumstances the amendment proposes that are already law. Florida’s Supreme Court disagreed when it ruled 4-3 that Amendment 1’s language is unambiguous and meets the legal standards to go before voters.

Opponents of Amendment 1 still think the bill’s language is misleading and believe the fact that it narrowly passed the Court’s vote on clarity is all the more reason to label the amendment a dirty trick to fool voters on election day.

The words of Amendment 1 had their day in court and a majority of Florida justices affirmed their intention to be forthright and legally sound.

Now, it’s up to voters.   

Whether Amendment 1 passes on not, several circumstances will continue to exist in Florida under full protection of the law:

 

Florida will still be a regulated energy market.

State and local governments will still have the responsibility to protect consumer rights and public health, safety and welfare.

 

Electric utilities will still be regulated by Florida’s Public Service Commission, which ensures utilities cannot act as monopolies and overcharge for electricity due to high demand and lack of competition.

 

Florida residents will still be allowed to buy or lease solar equipment and generate their own electricity.

 

Net metering will still be legal, thereby allowing solar customers to sell excess energy back to the utility.  

 


Third parties will not be permitted to sell electricity (solar or other) to customers.


Hanging in the balance with Amendment 1 is the future of cost shifting from solar customers to those who choose not to install solar. The problem Amendment 1 seeks to resolve has proven to be solar’s biggest roadblock in both regulated and deregulated energy markets throughout the US.  

If the rest of the country’s tribulations of growing solar’s presence in a way that’s fair and just to all electricity consumers are any indication of what Florida can expect as solar generation penetrates our market, then voting YES on Amendment 1 is essential to ensure solar’s path to growth in the Sunshine State doesn’t reach a dead end before it really begins.
        

Fred Smith is a resident of Florida’s Hillsborough County and a customer of Tampa Electric Company (TECO). He has no professional association with any electric utilities or solar generation companies. Since 2014 he has worked closely with experts in the energy industry whose companies specialize in demand side energy management in deregulated markets nationwide. Email Fred HERE.

William Cratty was consulted to ensure this article’s accuracy concerning energy markets and utilities. William has worked in the energy industry since 1965, and has been a technical sales executive for CPower Energy Management since 2007. He holds a bachelor’s degree in engineering from the US Merchant Marine Academy and has been granted three US patents for his design of a high availability power system.



Reference articles:

5 State Energy Races to Watch this November

Solar Advocated Ramp up Pressure on Florida Ballot Initiative

Coalition Activists Team Oppose Utility Supported Solar Power Amendment in Florida

Florida Solar Energy Subsidies and Personal Solar Use Amendment 1 (2016)

Fact checking Amendment 1

Florida’s Regulated Monopoly Utility Model Discourages Competition, Costs Customers Dearly

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Proposed Florida amendments would set solar energy policy

Ahmad Faruqui BEFORE THE PUBLIC UTILITIES COMMISSION OF NEVADA

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Arizona Turns to Solar Valuation After Demand Charge Decision

Inside Arizona Utilities Push to Reform Net Metering

Are Residential Demand Charges the Best Rate Reform for DERs?

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A common confusion over net metering is undermining utilities and the grid

As the solar industry matures, business gets a little more complicated

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Amendment 1 would preserve rights, protect consumers

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