‘You Better Not Sell My Utility’
Originally published December 10, 2012
|Lake Mirror is one of the more than three dozen named lakes in Lakeland. Photo courtesy of Lakeland.
Lakeland Electric is often a topic of conversation in the central Florida city it serves. Talk is good—it means businesses, citizens and other customers are aware of the municipally owned utility and its mission.
But sometimes the talk can be uncomfortable. That was the case in early 2012, when a prominent local businessman suggested the utility should be sold to an investor-owned utility and began pressing local officials to amend the city’s charter to pave the way for a utility sale. The businessman’s motives were apparently purely ideological. The Lakeland utility is hardly a burden to the city it serves—its rates are among the lowest in the state, its credit rating is the highest it’s ever been, and it is among the best-of-the best performers for reliability.
Some business leaders in the community believe Lakeland Electric is of a size and significance that it should no longer have a board of directors made up of local elected officials, said Mayor Gow Fields. That goal could be satisfied either by establishing a utility authority to run the municipal enterprise or selling the utility to an IOU, he said.
The sellout talk died after a few months when it became clear that customers want to keep the utility as a city department.
Such uncomfortable talk is nonetheless valuable because it raises the profile of the utility and creates an opportunity for policymakers and utility personnel to emphasize the utility’s strengths. Lakeland Electric has the lowest rates among all 33 municipal electric utilities in Florida. Its reliability practices earned it the highest possible diamond-level score in the American Public Power Association’s RP3 (Reliable Public Power Provider) program. Lakeland Electric is the third-largest municipal electric utility in Florida and the 26th largest public power utility (in customers served) in the United States.
A 1.2-acre botanical garden, Hollis Gardens sits on Lakeland’s Lake Mirror.
A decade ago, the utility was a hot topic of conversation in Lakeland, but then the picture was not so pretty. Lakeland Electric was upside down in a power supply contract after plans to build a fluidized-bed coal-fired plant morphed into a new plan for a combined cycle-natural gas plant—and then gas prices spiked to $14 per mmBtu. Those troubles triggered talk about changing the utility’s governing structure to take it out of the hands of politicians. Local leaders agreed instead to establish an advisory Utility Committee composed of all seven city commissioners (the utility’s governing board) and representatives of Lakeland Electric’s major customer groups. The 13-member panel includes representatives for in-city and out-of-city residential customers, commercial customers and large industrial customers. The Chamber of Commerce recommends candidates for the commercial customer representative. The local Economic Development Council recommends an industrial customer representative.
“We now have a more robust committee representing these various customer groups,” said City Manager Doug Thomas. “They bring a diverse viewpoint. The irony is that if the mayor and City Commission voted as a block, they would always control the outcome, but the commission does not vote as a block, so a number of times, decisions were directed by the citizen appointees.”
The net result of discussions and changes to governing structure made a decade ago is the strong standout utility that is Lakeland Electric today.
Mayor Fields and City Manager Thomas both believe that customers of Lakeland Electric are very aware of the advantages they enjoy by having a city-owned electric utility.
“Our customers don’t necessarily always like what we do, but don't confuse that with the fact that they know who they can talk to if they don’t like what’s being done,” said Thomas. “Living in Florida, electricity costs are a major expense for any residence or business because of air conditioning.”
During the bleak times a decade ago, “there was no conversation about selling this utility,” said Fields. The message was simply “you guys get to work and fix this.”
Last summer, Mayor Fields took a call from an elderly customer who was worried about an upcoming increase to the utility’s fuel charge. He related the conversation: “She said, ‘young man, I really don't want you all to raise the fuel charge, but if you have to, I’ll understand. Let me tell you something else, you better not sell my utility.’”
Lakeland citizens recognize that local ownership gives them a voice in energy policy, Fields said. “In the IOU world, only the big businesses and the big customers will be looked out for and the little people will be forgotten.” An activist who recently called the mayor to voice his opposition to Lakeland Electric’s participation in a federally subsidized smart meter rollout opened the conversation thanking the mayor for not doing anything to sell the utility.
While the Utility Committee generally prevails on policy decisions, elected officials rejected the advice of citizen representatives on the panel when the utility proposed a $30 million smart meter project, with half of the project cost to be covered by a federal economic recovery grant.
Lakeland Electric operates the 964-MW McIntosh Plant and the 143-MW Larsen Plant.
“The Utility Committee as a group did not support that, but the City Commission did and we proceeded accordingly,” said Thomas. Smart meter implementation is nearly complete and Lakeland Electric will roll out a time-of-use rate experiment in 2013.
Fields is comfortable with the commission’s decision to reject customer advice on the smart grid project. Utility staff said “smart grid is the way of the future, if we don’t do it now, we’ll do it later,” the mayor said. “Well, if you have an opportunity to put some of your money with it, along with the federal grant, you’re going to help the country move to a different place, where we really need to go and it’s going to be beneficial to your customers. Why not do it?
“This was not the only stimulus money this community benefited from,” Fields said. “It was interesting, while people wanted to oppose money for smart grid, they were all over accepting money for road projects.”
Local ownership and control of the electric utility gives Lakeland a key economic development advantage, said City Manager Doug Thomas.
Fields believes that if Lakeland citizens were asked to vote today on the smart meter project, they would approve it.
As has happened in other communities, some customers objected to installation of smart meters, prompting policymakers to develop an opt-out policy toward the end of the project’s 30-month rollout period. Of 120,000 customers, fewer than 100 opted out of the project. The utility let employees and contractors know that the opt-out policy is available, but otherwise did not advertise it.
Customers who opted out fall into two camps, Fields said. They are either concerned about harmful health effects or they are worried about “Big Brother.” People who oppose smart meters because they fear the health effects stand in front of a microwave oven and use mobile phones, with no fear, he noted. Some utilities forced customers to take the smart meters, even calling in police to provide safety while utility workers changed out equipment, he said.
For Lakeland Electric, the opt-out policy was a delicate dance. A too-public or too-early opt-out offer could lead to entire sections of the service territory clinging to old technology. If that happens, “you’re not going to get data from that section and you’re not going to have good meter management and voltage regulation and notification of power outages,” said Thomas. “We think we’ve got a reasonable balance here. We will charge a reasonable fee because we will have to read those meters manually. We’ll have to use field personnel to do meter turn-ons and turn-offs.” The fee for people who do not have a smart meter will be around $16 a month, he said.
Lakeland citizens own the utility and want to be able to choose who serves on the governing board, said Mayor Gow Fields.
Fields, Thomas and others at Lakeland Electric are modest when asked to explain how the utility achieved the rare diamond-level RP3 ranking. Of 167 public power utilities nationally currently recognized as Reliable Public Power Providers, only nine achieved the highest diamond level.
Joel Ivy joined Lakeland Electric last summer as general manager. He came to Lakeland from California, where he served briefly as energy manager for Imperial Irrigation District after a 25-year career in the investor-owned utility sector. Lakeland Electric’s strength, quite simply, rests with the quality of its staff, he said.
“It starts with the people who are committed not to winning an award, but to doing the right things,” he said. “There is no doubt that staff, long before I got here strived for conducting their business in the right ways, managing the assets of the people in the right way. If you do those kinds of things, the opportunities for awards just come your way. First and foremost, you have to have your mind set on running your business as well as you can. I can’t put my finger on any one thing. We have a good safety focus. We are trying to be as plugged in with our employees as we can.”
Tony Candales, has been assistant general manager for production at Lakeland Electric for seven years. Improving reliability has been a high priority for the utility over the last several years, he said. “I think focus is a very important factor in our success the last few years,” he said. ‘Make sure we are doing what the customer wants—they are the owners and we are doing what the owners are telling us.
“The amount of time that we interrupt power for our customers is very, very, very low,” he said. “That’s the bottom line—making sure that every time a light switch is flipped, the light comes on and that light is not only reliable and safe, but it’s also at a good rate.”
Lakeland Electric has long been an industry leader in work force development. The utility has an excellent lineworker apprentice program with dedicated facilities and trainers. “These are top-shelf linemen who are training these young people,” Ivy said. The utility also operates “Power Academy,” a partnership with local schools to promote interest in utility careers to high school students through mentoring, internships and job shadowing.
Utility General Manager Joel Ivy, a newcomer to Lakeland, likes the ongoing dialogue between the utility and its customers that prevails in public power communities.
For City Manager Doug Thomas, a locally owned and controlled and strong-performing electric utility is a key asset for economic development. When meeting with prospective new businesses, Thomas can bring a big package to the negotiating table, including water, wastewater, planning, zoning and low electricity prices. An air separation plant with an 8-MW load and 95 percent load factor recently opted to locate in Lakeland Electric’s territory. “We were competing against TECO [Tampa Electric Co.], Thomas said. “They landed here because we could wrap our arms around that project and treat them uniquely. They needed to be close to generation. They needed to be close to a transmission line. They needed to be close to I-4 [the interstate highway] and they needed very heavy zoning. We have all that. We put them out by the power plant.” The company is sharing cooling water facilities with the power plant.
“Most of the time, when a company decides it is going to be coming into central Florida and they’ve knocked on our our door, we’ve found that we win because we bring all those assets to the table,” Thomas said. “We can fast-rack them if needed. We’re not handing them off between various governmental agencies.”
That economic development advantage was part of the recent conversation about selling the utility to an IOIU. “Why would we want to sacrifice that ability” Thomas said. “We can do things much more quickly. We can fine-tune and tailor these economic development tools. I think we’ve been very successful on that front.”
Nearly half of Lakeland Electric’s load is commercial and industrial.
The uncomfortable talk about selling Lakeland Electric to a profit-making company has, happily, gone away. As a relative newcomer to the public power segment of the electric utility industry, Ivy observed that public power utilities are much closer to their customers than IOUs.
“Here you are talking to them every time you have a committee meeting or commission meeting or something like that,” he said. “They are there to commend you or dress you down, whatever needs to be said.” The recent sellout dialogue demonstrated to Lakeland Electric that the utility’s customers “are much more with us than we gave them credit for,” Ivy said. “They by and large spoke up in favor of keeping the utility publicly owned. The customers of this utility are proud to have it local and absolutely want to keep it that way, so it was pretty much a mandate to leave it alone. Don’t mess with it.”
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