FPL Spends Billions to Stay Ahead of South Florida

FPL Spends Billions to Stay Ahead of South Florida's Growing Electricity Needs

By Joseph Mann, South Florida Sun-Sentinel -- April 25

At the sprawling Florida Power & Light electric generating plant near Indiantown in Martin County, hundreds of construction workers are assembling an enormous, $500 million jigsaw puzzle that will help keep the lights on and the air conditioners humming in South Florida.

Wearing a helmet and protective glasses, Mike Arechabala, the Martin plant manager, proudly pointed to components in the complex project, which includes adding two natural gas-fired generating units and upgrading other existing units.

These gas-powered generating units offer increased efficiency: Their hot exhaust gas is captured to drive a traditional steam turbine and an additional generator, thereby increasing output.

"We're adding 800 megawatts of capacity, and we're scheduled to be finished by May of 2005," he said. "This additional capacity will provide electricity to about 170,000 residential and business customers." After the addition, the Martin plant will have total generating capacity of 3,600 megawatts, he added, enough to supply power to about 770,000 residential and business customers.

While energy produced at the plant can go anywhere in FPL's network, depending on where it's needed, this new capacity is required to help meet South Florida's seemingly insatiably demand for electricity.

The Martin plant expansion forms part of an ambitious, multibillion-dollar investment program being implemented by Florida Power & Light Co., the largest subsidiary of Juno Beach-based FPL Group Inc. The goal is to add about 500 megawatts to 600 megawatts of generating capacity annually to keep up with explosive demand for electricity in South Florida and other parts of the company's Florida market, which includes about 8 million people in 35 counties.

Broward County, for example, which has its own FPL generating facilities, must import about 45 percent of the electricity it uses from the rest of the FPL grid. Miami-Dade County needs to import about 40 percent.

"No one in the United States has the kind of growth we're experiencing," said Armando Olivera, president of Florida Power & Light Co. "We're growing roughly at the rate of one 500 megawatt power plant per year and we're hooking up more new customers than anyone else," he added.

The company currently is advancing the largest investment program in its history, except for investments made decades ago for its nuclear facilities, he said.

From 2004 through 2008, the FPL group projects investments of about $6.4 billion for new generating and power transmission capacity, as well as for upgrades of existing facilities and infrastructure projects.

This year the company is spending more than $1 billion to add 1,900 megawatts of generating capacity at its Martin and Manatee plants.

Down the line, the company plans to build new generating facilities at its Turkey Point complex in Miami-Dade County and other sites, erect new transmission and distribution lines and add substations throughout the tri-county area.

FPL relies on fossil fuels (oil, natural gas and coal) for about 59 percent of its energy, nuclear power (21 percent) and purchases from other utilities, mostly under long-term contracts (20 percent).

Delivering electric power to millions of people is a complex enterprise requiring years of planning and large investments. Any new construction or upgrades must be approved by the Florida Public Service Commission, a regulatory body, and pass through the lengthy process of meeting a host of federal, state and local requirements.

FPL's plans also must conform to nationwide power industry norms designed to avoid widespread power failures -- such as the blackout last August that struck the Northeast and Midwest -- if a problem occurs on the national power grid.

"This is a very complicated process," Olivera said. "It starts when we coordinate with a new business or house that is being built, installing the meter on time, hooking them up to a substation, connecting them to transmission lines and finally to a generating plant. I sometimes am amazed myself at how it all comes together."

Securities analysts generally assign high marks to FPL management. A recent report by Prudential Equity Group LLC called FPL "a low risk, steady but dynamic company that has stayed clear of many of the strategic gaffes that have dogged many of its peers."

FPL currently has more than enough generating capacity to meet peak demand during summer and winter months through a combination of power generated at its own plants and energy purchased from other utilities. It also maintains a 20 percent reserve capacity to cover peak demand periods and to provide a margin of safety when generating plants are shut down for maintenance or repairs.

Population growth is a key factor in determining FPL's future electric power requirements, and South Florida is outpacing most of the nation. "In absolute numbers, South Florida is growing and growing dramatically," said Richard Ogburn, principal planner at the South Florida Regional Planning Council. "Broward, Miami-Dade and Palm Beach counties are among the fastest-growing counties nationally," he added.

These new people are going to need electricity, especially for energy-devouring air conditioning -- which accounts for nearly half the average residential bill. "We're adding about 100,000 customers per year, mostly in South Florida," including residential and business clients, said Bill Swank, a spokesman for FPL. The Scripps Research Institute, for example, could be a catalyst for creating thousands of new jobs around its operations in Palm Beach County in the future, he added. "And not only are we adding new customers at a rate of about 2.4 percent per year, but their use of energy is also increasing by about 1.6 percent per year."

Adding new facilities is not always easy in heavily populated areas.

"We have people who want the power but don't want new transmission lines or sub-stations in their neighborhood," Swank said. In Broward County, FPL plans to add 13 new substations and 19 miles of transmission lines through 2008.

Although South Florida has not suffered widespread brownouts in recent years, some neighborhoods -- especially in older parts of cities -- experience service interruptions since power lines, transformers and other equipment installed years ago were not meant to meet current demand. In Deerfield Beach, for example, the company earlier this month sent a letter to subscribers saying that it was replacing and upgrading electrical circuits in an effort to halt service interruptions.

FPL's huge capital investments eventually will have an impact on customers' bills.

While FPL funds its investment program from internal cash flow, bond issues and other borrowings, it will include new projects in its "rate base," a complicated formula used to calculate how much the company will charge to recover costs and make a profit. Any increase will have to be approved by the Public Service Commission, following a period of analysis and discussions.

For the time being, though, the rate base will not change. "We are now locked into a rate agreement through the end of 2005," Swank said. "So no change in the rate -- either up or down -- would occur before that time."

-----

To see more of the South Florida Sun-Sentinel -- including its homes, jobs, cars and other classified listings -- or to subscribe to the newspaper, go to http://www.sun-sentinel.com.