Editor’s note: As Inside Vero reported last April, Florida Power & Light has lost some $4 billion hedging natural gas prices. The Wall Street Journal Sunday reported further on the utility giant’s losses. The Press Journal and the island weekly remain silent on FPL’s bets gone bad. Both newspaper also have yet to report of FPL’s request for a $1.337 billion rate increase that will add some $13 to the average monthly residential bill.
REBECCA SMITH/WALL STREET JOURNAL
Natural-gas prices have plunged 74% in the past 10 years, but some U.S. utilities haven’t reaped the full benefit because of bad bets they made to hedge the cost of the fuel.
Utilities that distribute natural gas or burn it to make electricity often enter into hedging contracts as a form of insurance to protect themselves and their customers against wild variations in the fuel’s price.
The derivatives contracts don’t represent actual fuel deliveries. Rather, if gas prices go up, utilities make profits on the contracts that help offset their higher fuel costs. If gas prices go down, they lose money on the contracts but still benefit by paying less for their fuel.
Indian River Guardian 