The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Rules
BILL: CS/CS/SB 1162
INTRODUCER: Community Affairs Committee; Regulated Industries Committee; and Senator DiCeglie
SUBJECT: Renewable Energy Cost Recovery
DATE: April 18, 2023 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Schrader Imhof RI Fav/CS
2. Hunter Ryon CA Fav/CS
3. Schrader Twogood RC Favorable
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/CS/SB 1162 amends s. 366.91, F.S., relating to Florida’s renewable energy policy, in the
following ways:
The bill allows all public utilities under ch. 366, F.S., not only natural gas companies, to be
approved for cost recovery for renewable natural gas (RNG) contracts where the pricing of
the natural gas exceeds the market price of conventional natural gas
The bill revises the test for the approval of the provision from “prudent and reasonable” to
meeting the goals as stated in s. 366.91(1), F.S., “by promoting the development or use of
renewable energy resources in this state and providing fuel diversification and the contract is
otherwise reasonable.”
The bill also allows public utilities to recover, through an appropriate cost-recovery
mechanism administered by the Florida Public Service Commission, reasonable incurred
costs for certain renewable natural gas and hydrogen fuel infrastructure projects.
The bill specifies limitations and approval requirements for cost recovery for renewable
natural gas or hydrogen-based fuel infrastructure projects.
The bill has an effective date of July 1, 2023.
BILL: CS/CS/SB 1162 Page 2
II. Present Situation:
Florida Public Service Commission
The Florida Public Service Commission (PSC) is an arm of the legislative branch of
government.1 The role of the PSC is to ensure Florida’s consumers receive utility services,
including electric, natural gas, telephone, water, and wastewater, in a safe, affordable, and
reliable manner.2 In order to do so, the PSC exercises authority over public utilities in one or
more of the following areas: rate base or economic regulation; competitive market oversight; and
monitoring of safety, reliability, and service issues.3
The PSC monitors the safety and reliability of the electric power grid4 and may order the
addition or repair of infrastructure as necessary.5 The PSC has broad jurisdiction over the rates
and service of investor-owned electric and gas utilities.6 However, the PSC does not fully
regulate municipal electric utilities (utilities owned or operated on behalf of a municipality) or
rural electric cooperatives. The PSC does have jurisdiction over these types of utilities with
regard to rate structure, territorial boundaries, bulk power supply operations, and planning.7
Municipally owned utility rates and revenues are regulated by their respective local
governments. Rates and revenues for a cooperative utility are regulated by their governing body
elected by the cooperative’s membership.
There are four investor-owned electric utility companies (electric IOUs) in Florida: Florida
Power & Light Company (FPL), Duke Energy Florida (Duke), Tampa Electric Company
(TECO), and Florida Public Utilities Corporation (FPUC).8 In addition, there are eight investor-
owned natural gas utility companies (gas IOUs) in Florida: Florida City Gas, Florida Division of
Chesapeake Utilities, FPUC, FPUC-Fort Meade Division, FPUC-Indiantown Division, Sebring
Gas System, and St. Joe Natural Gas Company. Of these eight gas IOUs, five engage in the
merchant function servicing residential, commercial, and industrial customers: Florida City Gas,
FPUC, FPUC-Fort Meade Division, Peoples Gas System, and St. Joe Natural Gas Company.
Florida Division of Chesapeake Utilities, FPUC-Indiantown Division, and Sebring Gas System
are only engaged in firm transportation service.9
1
Section 350.001, F.S.
2
See Florida Public Service Commission, Florida Public Service Commission Homepage, available at
http://www.psc.state.fl.us (last visited Mar 16, 2023).
3
Florida Public Service Commission, About the PSC, available at https://www.psc.state.fl.us/about (last visited Mar. 26,
2023).
4
Section 366.04(5) and (6), F.S.
5
Section 366.05(1) and (8), F.S.
6
Section 366.05, F.S.
7
Florida Public Service Commission, About the PSC, supra note 3.
8
Florida Public Service Commission, 2022 Facts and Figures of the Florida Utility Industry, pg. 5, Apr. 2022 available at:
https://www.floridapsc.com/pscfiles/website-files/PDF/Publications/Reports/General/FactsAndFigures/April%202022.pdf
(last visited Mar. 26, 2023
9
Id. Firm transportation service is offered to customers under schedules or contracts which anticipate no interruption under
almost all operating conditions. See Firm transportation service, 18 CFR s. 284.7.
BILL: CS/CS/SB 1162 Page 3
Electric IOU and Gas IOU rates and revenues are regulated by the PSC and the utilities must file
periodic earnings reports, which allow the PSC to monitor earnings levels on an ongoing basis
and adjust customer rates quickly if a company appears to be overearning.10
Section 366.041(2), F.S., requires public utilities to provide adequate service to customers. As
compensation for fulfilling that obligation, s. 366.06, F.S., requires the PSC to allow the IOUs to
recover honestly and prudently invested costs of providing service, including investments in
infrastructure and operating expenses used to provide electric service.11
Public Utilities under Chapter 366, Florida Statutes
Pursuant to s. 366.02(8), F.S., “public utility,” as used in ch. 366, F.S., means “every person,
corporation, partnership, association, or other legal entity and their lessees, trustees, or receivers
supplying electricity or gas (natural, manufactured, or similar gaseous substance) to or for the
public within this state.” However, all of the following types of utilities are exempted from this
definition:
Rural electric cooperatives.
Municipal electric and gas utilities.
Dependent or independent special natural gas districts.
Any natural gas transmission pipeline company making only sales or transportation delivery
of natural gas at wholesale and to direct industrial consumers.
Any entity, selling or arranging for sales of natural gas, that neither owns nor operates natural
gas transmission or distribution facilities within the state.
A person supplying liquefied petroleum gas, in either liquid or gaseous form, irrespective of
the method of distribution or delivery, or owning or operating facilities beyond the outlet of a
meter through which natural gas is supplied for compression and delivery into motor vehicle
fuel tanks or other transportation containers, unless such person also supplies electricity or
manufactured or natural gas.
Renewable Energy
Section 366.91, F.S., establishes a number of renewable policies for the state. The purpose of
these policies, as established in statute, states that it is in the public interest to promote the
development of renewable energy resources in this state.12 Further, the statute is intended to
encourage fuel diversification to meet Florida’s growing dependency on natural gas for electric
production, minimize the volatility of fuel costs, encourages investment within the state, improve
environmental conditions, and make Florida a leader in new and innovative technologies.13
The section defines “renewable energy” as:
[E]lectrical energy produced from a method that uses one or more of the following
fuels or energy sources: hydrogen produced or resulting from sources other than fossil
10
PSC, 2022 Annual Report, p. 6, (available at: https://www.floridapsc.com/pscfiles/website-
files/PDF/Publications/Reports/General/AnnualReports/2022.pdf) (last visited: Mar. 26, 2023).
11
Id.
12
Section 366.91(1), F.S
13
Id.
BILL: CS/CS/SB 1162 Page 4
fuels, biomass, solar energy, geothermal energy, wind energy, ocean energy, and
hydroelectric power. The term includes the alternative energy resource, waste heat,
from sulfuric acid manufacturing operations and electrical energy produced using
pipeline-quality synthetic gas produced from waste petroleum coke with carbon
capture and sequestration.14
Renewable Natural Gas
Natural gas is a fossil energy source which forms beneath the earth’s surface. Natural gas
contains many different compounds, the largest of which is methane. 15 Conventional natural gas
is primarily extracted from subsurface porous rock reservoirs via gas and oil well drilling and
hydraulic fracturing, commonly referred to as “fracking.” The term renewable natural gas (RNG)
refers to biogas that has been upgraded to use in place of fossil fuel natural gas (i.e. conventional
natural gas).16
Section 366.91, F.S., identifies sources for producing RNG as a potential source of renewable
energy.17 The section specifically defines renewable natural gas as anaerobically generated
biogas,18 landfill gas, or wastewater treatment gas refined to a methane content of 90 percent or
greater. Under the definition, such gas may be used as a transportation fuel or for electric
generation, or is of a quality capable of being injected into a natural gas pipeline.
Biogas used to produce RNG comes from various sources, including municipal solid waste
landfills, digesters at water resource recovery facilities, livestock farms, food production
facilities, and organic waste management operations.19 Raw biogas has a methane content
between 45 and 65 percent.20 Once biogas is captured, it is treated in a process called
conditioning or upgrading, which involves the removal of water, carbon dioxide, hydrogen
sulfide, and other trace elements. After this process, the nitrogen and oxygen content is reduced
and the RNG has a methane content comparable to natural gas and is thus a suitable energy
source in applications that require pipeline-quality gas, such as vehicle applications.21
14
Section 366.91(2)(e), F.S.
15
United States Energy Information Administration, Natural gas explained, Dec. 27, 2022. Available at
https://www.eia.gov/energyexplained/natural-gas/ (last visited Mar. 26, 2023)
16
Environmental Protection Agency, Landfill Methane Outreach Program (LMOP): Renewable Natural Gas, available at
https://www.epa.gov/lmop/renewable-natural-gas (last visited Mar. 26, 2023).
17
Section 366.91(2)(e), F.S., defines “renewable energy, in part, as energy produced from biomass. Section 366.91(2)(b),
F.S., defines “biomass” in part, as “a power source that is comprised of, but not limited to, combustible residues or gases
from…waste, byproducts, or products from agricultural and orchard crops, waste or coproducts from livestock and poultry
operations, waste or byproducts from food processing, urban wood waste, municipal solid waste, municipal liquid waste
treatment operations, and landfill gas.” RNG would be such a combustible gas.
18
Section 366.91(2)(a) defines “biogas” as a mixture of gases produced by the biological decomposition of organic materials
which is largely comprised of carbon dioxide, hydrocarbons, and methane gas.
19
Environmental Protection Agency, supra note 16.
20
Id.
21
United States Department of Energy, Renewable Natural Gas Production, available at
https://afdc.energy.gov/fuels/natural_gas_renewable.html (last visited: Mar. 26, 2023).
BILL: CS/CS/SB 1162 Page 5
RNG meeting certain standards, qualifies as an advanced biofuel under the Federal Renewable
Fuel Standard Program.22 This program was enacted by Congress in order to reduce greenhouse
gas emissions by reducing reliance on imported oil and expanding the nation’s renewable fuels
sector.23
Nationally, there were 548 landfill gas facilities in operation as of September 2021, and, as of
2017, 250 anaerobic digester systems operating at commercial livestock farms in the United
States.24 Of the more than 16,000 wastewater treatment plants in operation in the United States,
approximately 1,300 have anaerobic digesters on site and 860 of those have the equipment to use
their biogas on site.25
Hydrogen Fuel
The production of hydrogen involves the separation of the element from other elements in which
it occurs. While there are many different sources of hydrogen and methods for producing it as a
fuel, the most common methods used currently are steam-methane reforming and electrolysis.26
Through either method, hydrogen is not an energy source, per se, since it is produced using other
energy sources. Rather, produced hydrogen is an energy carrier.27
Steam-Methane Reforming
The most-widely used method for hydrogen production, which accounts for nearly all
commercially produced hydrogen in the United States, is steam-methane reforming. With steam-
methane reforming, hydrogen atoms are separated from carbon atoms in methane using high
temperature (1,300-1,800 degrees Fahrenheit) under 3-25 bar pressure28 in the presence of a
catalyst. The end-result of this process is the production of hydrogen, carbon-monoxide, and a
small amount of carbon dioxide.29
For industrial facilities and petroleum refineries, natural gas is the typical base material from
which to produce hydrogen by steam-methane reforming. Biogas and landfill gas is also a base
material to produce hydrogen used by several fuel cell power plants in the United States.
22
United States Department of Energy, Renewable Fuel Standard, available at
https://afdc.energy.gov/laws/RFS#:~:text=The%20Renewable%20Fuel%20Standard%20(RFS,Act%20of%202007%20(EIS
A) (last visited: Mar. 26, 2023).
23
Environmental Protection Agency, Renewable Fuel Standard Program, available at https://www.epa.gov/renewable-fuel-
standard-program (last visited Mar. 26, 2023).
24
United States Department of Energy, supra note 21.
25
Id.
26
United States Energy Information Administration, Hydrogen Explained: Production of Hydrogen, Jan. 21, 2022, available
at https://www.eia.gov/energyexplained/hydrogen/production-of-
hydrogen.php#:~:text=The%20two%20most%20common%20methods,electrolysis%20(splitting%20water%20with%20electr
icity.(last visited Mar. 26, 2023)
27
International Renewable Energy Agency, Hydrogen, available at https://www.irena.org/Energy-
Transition/Technology/Hydrogen (last visited Mar. 26, 2023).
28
One bar equals 14.5 pounds per square inch of pressure. For comparison, at sea level, the average air pressure on Earth is
1.0132 bars. National Oceanic and Atmospheric Administration, Air Pressure, available at
https://www.noaa.gov/jetstream/atmosphere/air-
pressure#:~:text=The%20standard%20pressure%20at%20sea,the%20atmosphere%20decreases%20with%20height (last
visited: Mar. 26, 2023).
29
United States Energy Information Administration, supra note 26.
BILL: CS/CS/SB 1162 Page 6
Electrolysis
Electrolysis, in the sense of hydrogen production, means a process where hydrogen is split from
water using an electric current. On a large, commercial scale, the process may be referred to as
power-to-gas, where power is electricity and gas is hydrogen.30 This hydrogen is then captured
and used or sold as an end product or as a fuel to generate electricity.31 The electrolysis process
itself is emission-free and has no by-products other than hydrogen and oxygen. However, the
energy source used to power the electrolysis (which could be from renewables, nuclear, or fossil
fuels) may or may not be emission-free or have other byproducts.
Hydrogen Categories
Recently, to distinguish between the energy sources used to power hydrogen production,
hydrogen producers, marketers, government agencies, and others have used a color-coded
system. The nine commonly used color categories are detailed below:
Green: Hydrogen produced by water electrolysis and employing renewable electricity as the
fuel source. It is so called because the process itself does not produce emissions.
Blue: Hydrogen produced from fossil fuels, but the carbon dioxide produced by the process
is sequestered undergroun