In a decision issued on April 20, 2000, the Florida Supreme Court by a 6-1 decision held that Florida law precluded the Florida Public Service Commission (FPSC) from issuing a determination of need ruling to applicants for a merchant power plant. Without a ruling on the determination of need, under Florida law construction of the new plant may not be undertaken. On August 19, 1998, Duke Energy New Smyrna Beach Power Co., Ltd. (Duke) and the Utilities Commission of the City of New Smyrna Beach (New Smyrna) filed a joint petition with the FPSC for a determination of public need for a 514-megawatt, combined cycle merchant plant. Duke and New Smyrna entered into an agreement under which Duke would build, own, and operate the plant, and New Smyrna would provide a location, tax reductions, and certain facilities. The joint petition proposed that thirty megawatts be sold to New Smyrna for consumption by its residents, and the remainder would be sold at wholesale to utilities for resale to their retail customers. Under the proposed plan, wholesale power would be primarily used to serve Florida customers, but would not exclusively be used for Florida customers. This decision reversed the 3-2 FPSC decision to grant the determination of need. Three electric utilities – Tampa Electric Company, Florida Power Corporation, and Florida Power & Light Company – appealed the FPSC ruling to the Florida Supreme Court.
According to the court, the FPSC exceeded the authority granted it under the Florida Electrical Power Plant Siting Act (Siting Act) and the Florida Energy Efficiency & Conservation Act (FEECA). The Siting Act requires that any new power generation plant whose capacity exceeds seventy-five megawatts must obtain certification under the various requirements of the Siting Act. Among other things, the Siting Act requires the FPSC to prepare a determination of need report pursuant to FEECA to applicants seeking certification of their power plants. In granting a determination of need under FEECA, the FPSC must consider electric system reliability and integrity, the need for reasonable electricity costs, whether the plant is the most cost-effective alternative, and conservation measures the applicant might take to mitigate the need for the plant. The Siting Act provides that construction of new power plants may not be undertaken without first obtaining certification in the manner provided in the Siting Act. One of the steps in the certification process requires the FPSC to submit a determination of need report to the Florida Department of Environmental Protection. The department determines the completeness and sufficiency of the application. The siting board, consisting of the Governor and Cabinet, decides whether or not to issue the certification.
A proceeding on a determination of public need may be initiated by an applicant or by the FPSC’s own motion. According to the court, the Siting Act defines an "applicant" as "any electric utility which applies for certification pursuant to the provisions of this act." Florida statute includes public utility districts and regulated electric companies engaged in the business of generating, transmitting or distributing electricity as "electric utilities" for purposes of the Siting Act. New Smyrna is a municipal electric utility directly serving retail customers in Florida. Duke is not subject to FPSC jurisdiction as a public utility, but is subject to the jurisdiction of the Federal Energy Regulatory Commission because it offers electrical power for sale at wholesale. Duke argued that it is a regulated electric company, because it is regulated by FERC, and that the inclusion of New Smyrna as an applicant satisfied the electric utility requirement.
In reviewing the statutory history of the Siting Act and FEECA, the court found that the term "utility" was limited to entities providing electricity or natural gas at retail to the public. The court further determined the Florida Legislature intended that the law provide the regulatory framework for Florida regulated utilities to provide service to their Florida retail customers. The court noted that the Legislature intended to balance the need for increased generation capacity with impacts on human health and the environment. The court stated that the "projected need of unspecified utilities throughout peninsular Florida" is not among the needs the FPSC is authorized by the Legislature to include in its determination of need analysis. Based on these findings and in reliance upon a 1992 Florida Supreme Court decision pertaining to the status of cogeneration facilities under the Siting Act, the court found the Legislature did not intend to authorize the FPSC to entertain a determination of need application for a plant whose output is not "fully committed to use by Florida customers who purchase electrical power at retail rates."
The court additionally disagreed that the inclusion of New Smyrna as an applicant resulted in compliance with Florida law, based on New Smyrna’s projected use of thirty megawatts. Also, New Smyrna argued that interpreting the Florida statutes in such a way as to prohibit Duke from seeking a determination of need ruling violates the United States Constitution by discriminating against out-of-state commerce without authority from the United States Congress. New Smyrna also argued that federal law (the Energy Policy Act of 1992, mandating a robust wholesale market) preempts any state requirement that Duke obtain a contract with a retail electric utility to construct the plant. In response to New Smyrna’s argument, the court opined that the Energy Policy Act specifically gave the states the authority to site facilities and to engage in environmental protection regulation.
One member of the court dissented. Justice Anstead disagreed with the majority’s "strained and artificial construction" of Florida law. Duke, New Smyrna, the FPSC, and others have filed a motion with the Florida Supreme Court asking it to rehear the case.