On Monday, NextEra Energy Resources announced its $6.5 billion bid to buy Southern Company subsidiaries Gulf Power and Florida City Gas — its third attempt this decade to expand its share of regulated utility business beyond its flagship utility, Florida Power & Light.
And unlike its previous $4.3 billion bid for Hawaiian Electric, or its $18.7 billion bid for Texas utility Oncor, both of which failed to garner state regulator approval, NextEra’s new bid has some significant home-court advantages — as long as it can satisfy Florida regulators that the deal won’t stifle competition.
FPL and Gulf Power also share some complementary technology implementations, many under the same vendor, smart grid networking company Itron. Meanwhile, Florida City Gas serves territories overlapping FPL’s, possibly allowing it to leverage its existing grid edge investments to serve those customers.
Territories Served by FPL, Gulf Power and Florida City Gas
To take a look at the details behind these key issues that will play into NextEra's latest acquisition attempt, we turned to GTM Research’s Grid Edge Data Hub for context. Here are some key points that emerge from the data.
1) Acquiring Gulf Power won’t radically alter NextEra’s market share in Florida. NextEra’s attempt to buy Hawaiian Electric was quashed by political opposition, led by groups concerned about out-of-state ownership and how it would affect HECO’s renewables and sustainability goals. Its bid for Oncor was done in by its unwillingness to meet Texas regulators’ demand to drop control of its board of directors.
In Florida, by contrast, NextEra faces the Florida Public Service Commission, which CEO Jim Robo praised in a Monday conference call as “one of the most constructive, progressive and forward-thinking regulators in the country.” That’s a bit of buttering up of the regulators NextEra is depending on for the deal to go through, of course. But it’s also a reasonable assessment of how the PSC has given FPL permission over the years for billions of dollars of ratepayer-backed investment in grid edge and clean energy.
The one downside could be concerns about over-concentration of market share within the state. The Southern Alliance for Clean Energy, a group that’s opposed utility mergers in the past, said that while it is still reviewing the NextEra-Gulf Power deal, the proposal “raises concerns that any one monopoly utility would control such a significant percentage of Florida’s energy market. Such consolidation of control may limit competition at a time when we need more and not less."
But as the following data on statewide utility market share indicates, Gulf Power is the smallest of the investor-owned utilities in the state, with roughly 600,000 customers compared to FPL’s nearly 4.9 million.
The Florida PSC isn’t the only regulator to get involved in the deal. The Federal Energy Regulatory Commission (FERC) will have to approve NextEra’s acquisition of Gulf Power, as well as its purchase of Florida City Gas’s interests in the Oleander and Stanton natural-gas generating plants. FERC’s mandate is to review the merger for antitrust violations, and to determine if it’s in the best interests of the customers they serve and the energy markets they’re a part of — which brings us to the second point.
2) The deal could lead to lower energy prices for Gulf Power customers. NextEra’s announcement noted that FPL’s typical residential customer bills are some of the lowest in the state, about 20 percent below the other Florida investor-owned utilities and nearly 30 percent below the national average. In contrast, Gulf Power has some of the higher per kilowatt-hour prices in the state, as of the passage of its latest four-year rate case in April 2017.
Top 10 Florida Utilities Ranked by Megawatt-Hour Sales and Average Retail Kilowatt-Hour Price
While Robo didn’t explicitly promise lower bills for Gulf Power customers, he did say that the company will aim "to extend over time to Gulf Power customers our best-in-class value proposition of low bills, clean energy, high reliability and outstanding customer service.” FPL’s performance has also been measured in four straight years of the lowest non-fuel operations and maintenance cost per kilowatt-hour in the country, and it had a record year for reliability in 2017, despite Hurricane Irma.
3) The two utilities have invested in different grid edge priorities. FPL’s performance across these aforementioned metrics has been aided by its major investments into smart meters, distribution grid automation, outage detection and restoration, and other technologies. According to Grid Edge Data Hub records, FPL’s investments on this front have dwarfed those of other investor-owned utilities in the state, as befits its market share.
Top 10 Florida Utilities in Terms of Grid Edge Technology Deployments by Sector
Gulf Power has also invested in smart meters, although they’re a different technology type than the one chosen by FPL. But it hasn’t made the big distribution automation, grid edge analytics and back-office software investments that FPL has.
At the same time, Gulf Power has invested in a set of customer-facing technologies that haven’t been a priority for FPL, including customer data analytics and a long-running demand response program that’s now capable of circuit-specific load reduction.
4) Both utilities share one key common technology vendor. While FPL and Gulf Power have taken divergent grid edge investment paths, they do share one key vendor — Liberty Lake, Wash.-based Itron, and the host of companies it has acquired over the years.
FPL picked Silver Spring Networks for its groundbreaking advanced metering infrastructure deployment, and it has been a major customer of the company’s managed services and SAAS offerings since then. Itron’s acquisition of Silver Spring last year brings that technology into its stable.
Gulf Power picked Sensus and its licensed spectrum star topology for its AMI network, but uses Itron meter data management software. And its long-running demand response and customer energy management platform is provided by Comverge, which was acquired by Itron last year.