Florida's utilities on 'new ground' with Hurricane Matthew

Power companies are bracing for widespread outages in Florida as Hurricane Matthew gathered strength and developed into a Category 4 storm.

The resurgent system raises questions about the region's ability to weather hurricane-force winds and storm surge. Utilities in the Southeastern United States have been preparing for years. Hurricane Matthew presents a serious test to their systems.

Florida Gov. Rick Scott has warned that millions of Floridians could be left without power. The Florida Power & Light Company, which serves roughly half of the state's population, says that as many as 1.2 million customers may lose power, based on the storm's current path.

FPL has deployed more than 12,000 response workers, but still it warned that Floridians could experience multiple outages. The company noted it has spent more than $2 billion since 2006 to make its grid more resilient to storms and to shorten the time it takes to bring power back online.

Following the devastating storm seasons in 2004 and 2005, utilities have hardened their systems and improved coordination with each other and the communities they serve, according to Ted Kury, director of energy studies at the University of Florida's Warrington College of Business.

Utilities are well prepared because they got the opportunity to test their systems during Hurricane Hermine one month ago, Kury said. Still. Hurricane Matthew represents a challenge for central and northeastern Florida, which seldom see storms of this scale.

"We're breaking a little bit of new ground here," he told CNBC. "Some of this is unknown."

That said, he does not expect the utilities to face serious threats to their power generation or transmission systems — including power plants and substations — which he said are adequately fortified against the storm.

"I'd be very surprised if a power plant itself failed. You're a lot more likely to see the interconnection of that power plant with the grid" to be adversely effected , he said. "That's a lot more at risk."

Problems are likely come from the distribution system. While some power lines in inland areas such as Gainesville have been moved underground, they remain above ground in many parts of coastal Florida, either because of potential damage from storm surge and seawater incursion or because the cost of undergrounding them was prohibitive, Kury explained.

"Especially here in Florida, with the amount of coastline we have, there is not a blanket policy that works for everybody," he said.

Florida has no crude oil refineries. The storm is not expected to affect the refinery-dense Gulf of Mexico. Florida's petroleum products are brought in by tanker or barge to a number of marine terminals, so supplies could be temporarily dented by the storm.

Already, pumps at many gas stations have run dry as distributors stock up and consumers fill their tanks. Gasoline prices have risen in recent days, but energy market analysts told CNBC that rise should moderate in the coming weeks as drivers stay off the roads, reducing demand for fuel.

The run on gasoline may show up in lower regional fuel inventories for the region in next week's report on U.S. stockpiles, but that trend could reverse the following week as reduced fuel demand leads to more petroleum products in storage, said Tom Kloza, global head of energy analysis at Oil Price Information Service.

Renewable energy doesn't generate much of Florida's energy, and the state's two hydroelectricity generators are in the Panhandle, far from the Hurricane Matthew's path.

Two nuclear power plants, both operated by FPL, are located on Florida's eastern coast. The Turkey Point Power Plant in Miami-Dade County is located just outside of the storm's path, but the St. Lucie Power Plant east of Port St. Lucie is within the area that could experience hurricane-force winds and storm surge.

FPL was not immediately available to respond to a request about preparations at its nuclear facilities.

A spokesperson for Duke Energy, which operates the Brunswick Nuclear Plant south of Wilmington, North Carolina, said it is actively tracking the storm and monitoring its path.

"As a preacaution, reactors will be shut down at least two hours before the onset of hurricane force winds," Duke's Catherine Butler told CNBC. She noted that nuclear plants are engineered to withstand severe weather events.