Limited by debt, Lakeland Electric faces dilemma as another power plant nears its end

As Lakeland Electric moves closer to powering up its RICE plant, the future generation of the city's electricity remains uncertain.

Mike Beckham, LE's general manager, said the municipal-owned utility needs to continue strategically in order to meet the city's power needs. One of its key generators, McIntosh Unit 5, is expected to start reaching the end of its life in 2030, Beckham told city commissioners at last week's utility committee meeting.

Unit 5, a natural gas-powered, combined-cycle plant can produce up to 398 megawatts of power — more than half the utility's current total capacity of 721 megawatts. Without the energy it supplies, Lakeland Electric is not capable of producing enough energy to meet peak winter and summer demands.

"We always talk about we could build that unit, but we have to keep an eye on environmental regulations," Beckham. "I think there's a bigger reality in terms of the dollars behind that. Cost is the bigger challenge."

Lakeland Electric's current debt ratio is around 53%, Beckham said, which he considers high. The utility's debt ratio ceiling is 55% in order to borrow bonds at a reasonable rate, he said.

If the city were to borrow $220 million for a new plant by 2030, or earlier, the utility's debt ratio would go above the recommended 55%.

Beckham's first recommendation is the city work to extend the lifespan of Unit 5 for several years.

"Typically, with those big baseload generating units, you can keep them going if you are willing to spend the money that's required on parts," he said.

Many other utility companies across the country are already doing this to preserve power generation capacity, Beckham said. Lakeland Electric's Unit 8, a combination of two turbine generators, is currently in an outage undergoing maintenance and some "aggressive" updates designed to extend its efficiency and lifespan.

Unit 5 would likely require Lakeland Electric spending more money to keep its reliability and efficiency up, the longer it's expected to run.

Beckham told The Ledger that he's not sure simply replacing Unit 5 with something similar is the best answer.

"The utility industry is changing away from baseload units. We're changing away from that," he said. "I don't think we are going to do ourselves any favors by planning a strategy that's an extrapolation of the old way of doing business. We have to figure out what the new way forward is and work our way into it in a smart way."

Beckham said the utility is immediately focusing on steps it can take to help curb an increasing electrical demand as more residents move to Lakeland. It streamlined its solar panel permitting process last summer and has worked with Block Energy to approve the building of a microgrid community in North Lakeland that's yet to break ground.

"We're not doing nothing," Beckham said. "We're pursuing things that make sense right now and taking care of that capacity without overly relying on PPAs [Purchase Power Agreements]."

Lakeland Electric is scheduled to begin commissioning its McIntosh Reciprocating Engine Plant consisting of six natural gas-powered RICE engines in November . This will increase the utility's maximum energy production by 120 megawatts to a total of 778 megawatts in the summer, 841 in the winter.

The utility is in negotiations with the Williams Acquisitions Holiday Company LLC to obtain power from the nearly 75 megawatt solar farm it is building on roughly 1,400 acres near Florida Polytechnic University . Beckham said he hopes to have a power purchase agreement to present to the city commission for approval within the next few months.

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Lakeland Electric spent $9.2 million to extend its PPA with the Orlando Utilities Commission for two years through December 2026 to provide additional time to bring in renewable energy resources.

Despite facing financial challenges, Beckham said Lakeland Electric aims to stay in the power-generating business and not become overly reliant on other utilities' generation.

"We are planning to stay in generation. We want to generate the vast majority, most of of our power and only buy PPA when we need them to cover a peak period," he said.

Beckham said the utility has proffered the idea of building a new large-scale generator in partnership with another, like former coal-powered McIntosh Unit 3 with OUC, but an opportunity has not presented itself. LE will continue to look for such opportunities if they arise.

Sara-Megan Walsh can be reached at swalsh@theledger.com or 863-802-7545. Follow on X @SaraWalshFl.

This article originally appeared on The Ledger: Limited by debt, Lakeland Electric faces dilemma as another power plant nears its end