Saturday, February 24, 2018
Business

In Tampa, a power company fights the squeeze of slower growth

John Ramil feels the squeeze in so many ways. • The head of Tampa's TECO Energy runs a 114-year-old power company geographically sandwiched between two industry Big Boys — Duke Energy to the north and west and FPL to the south — 15 and 10 times its market size, respectively. • TECO's chief executive officer feels the economic crush as he confronts slower increases in newcomers to the area at the same time his overall customer base continues to use less electricity. Why? More efficient appliances and lighting. Smaller homes. More solar panels. More consumer penny pinching thanks to the recession. • Ramil feels the environmental and regulatory pinch of a population demanding abundant and affordable power while also insisting on less air pollution and the adoption of more renewable sources of power.

Finally, the utility CEO feels the pressure of demanding shareholders asking how a relatively small power company like TECO plans to get bigger in what is widely expected to be a lower-growth economic era. With Florida's go-go days over for the foreseeable future, Ramil sees future customer growth hovering at just 1.5 percent and actual sales advancing at an even slower clip of 1.2 percent.

"The slowdown in consumption is big," Ramil admits.

He also finds unrealistic all the buzz about a coming revolution in how electricity is produced and distributed. After spending 37 of his 58 years at TECO, Ramil sees no magic bullet ahead to make energy less costly or complicated.

"It seems like in energy there tends to be this idea that 'Oh, here is a new solution' — but there is never a solution," answers Ramil. "We just have to keep moving, developing new technology and diversifying."

In a wide-ranging interview at TECO headquarters in downtown Tampa, Ramil stresses the national gas boom is a major opportunity for power companies like his.

Ramil not only wants to leverage the low price of abundant gas to help ease the pace of rising electric rates — he also wants to expand the use of natural gas via TECO's Peoples Gas subsidiary as a cost saver to industrial companies and fleets of delivery trucks that now rely on other sources of higher-priced energy.

The natural gas revolution in this country is not some short-term event, and Ramil recognizes its significance. It's no coincidence that the lead, front page story in Thursday's Wall Street Journal carried this remarkable headline: U.S. Rises To No. 1 Energy Producer. Who would have believed that possible a decade ago?

Ramil recalls the days when it literally was against the law to build power plants that run on natural gas. Why? Because people then thought we would run out and that the nation's lean gas supply was best used to heat people's homes in colder parts of the country.

Now power companies are stumbling over each other to build new natural gas plants.

But what about nuclear power?

In recent years, big power companies in Florida — including Progress Energy (now Duke Energy Florida) and FPL — have proposed new nuclear power plants in the Sunshine State. While Duke remains pro nuke, it recently opted to shutter, rather than repair, its aging Florida nuclear plant in Crystal River north of Tampa. Then Duke went further, shelving hideously expensive plans to build a nuclear plant in Levy County. Those actions effectively put an end to its role as a provider of nuclear power in the state. FPL's nuclear expansion is still under way in South Florida.

Ramil closely watched these nuclear events. Given its size, TECO would never build its own nuclear plant. But it might have invested in one built by another company to diversify TECO's fuel mix of gas and coal — if it made financial sense.

TECO concluded it was a bad economics.

"In the last several years we have taken two hard looks at nuclear," Ramil says. The company saw the magnitude of nuclear's upfront expenses, plus the rapidly escalating costs facing the few recent nuclear plants under construction. TECO compared those expenses to the low costs of building natural gas plants and the likelihood natural gas will remain cheap for many years.

Says Ramil: "We concluded that nuclear was too risky for us, our shareholders and our customers."

It's possible, Ramil concedes, that a nuclear power plant might become cost efficient at some point 15 to 20 years after it has started to generate electricity. But that's too far in the future to justify.

"For all your assumptions to remain accurate for such a long time period to reach that point did not feel like a risk we should take," the CEO says.

Wise words. Honest words. Some big pro-nuke power companies might want to take a fresh look at their own economic assumptions.

And what of renewable energy's future? Will solar power eventually revolutionize the Sunshine State's future?

Maybe, says Ramil. But first solar energy prices must drop further. And battery technology must evolve so that power generated from the sun — efficiently available on average about 20 percent of the day in Florida — can be stored for later use.

Until then, he says, it is complicated. Ramil even suggests customers who choose to install solar panels should be charged extra in some way for the right to generate their own power since at the same time they are guaranteed power when they need it from the nation's electric grid.

Ramil admits he struggles to explain his position. "The best I come up with is, say you have a car for your transportation needs, and 80 percent of the time it does not work," he says. That represents solar power. "The result is that you have to have more than one car." That backup vehicle is the electric grid.

"You have to make another investment," Ramil concludes. "And that is the challenge solar has now."

Nobody said running a power company was simple. Or that electric rates will do anything but rise in the future. Or that customers will ever send flowers and hugs to their utilities.

Until then, the big squeeze is on.

Contact Robert Trigaux at [email protected]

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