LE's New Power Plant is Late and Over Budget, but Moving Forward (2024)

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Lakeland Electric’s project to build a new power facility with six reciprocating natural gas-powered engines is more than a year behind schedule and $29.4 million over budget, but the utility said it does not plan to raise customer rates as a result.

In a presentation to the Utility Committee on Friday, construction manager David Holdener said the new power plant with six 680,000-pound RICE engines – initially expected to provide power this month – is now scheduled to start operating in November 2024 instead.

The city originally budgeted $145 million for the project, which included $18 million for contingencies, but the latest estimate is $174.4 million.

LE officials also announced that McIntosh Power Plant Unit 5, which has been offline since Feb. 23, is expected to be back in operation on June 18.

Unit 5 is the utility’s largest and produced 64% of its electricity last year, but it lurched to a halt three months ago when a compressor failed. Repairs for the unit, which typically produces 350 megawatts of electricity per hour, cost $21 million.

LE has been buying electricity from the Orlando Utilities Commission in the meantime under a series of short-term power purchase agreements. The purchases have kept customers’ lights on, but at a premium.

The unexpected Unit 5 repairs, RICE project cost overruns, and added cost of buying electricity from OUC are all included in a $70 million bond that commissioners approved on May 15. The new bond will effectively extend the city’s previous $131.8 million “Energy System Revenue Bonds” that were approved in 2021 and issued in 2022 with a maturity date of 2048.

Fuels Manager Tory Bombard said the customer fuel rate of $55 per 1,000 kilowatt hours of power will remain unchanged through the summer and the utility may be able to lower it to $52 in the fall, thanks to energy markets stabilizing.

For years, 1,000 kWh per month was considered the typical residential bill, though utility officials concede that average consumption is slightly higher these days. In February 2023, the average Lakeland Electric residential customer used 1,157 kWh monthly.

Bombard said fuel charges are a pass-through expense based on market conditions, not a source of profit for the utility.

Natural gas prices have declined in recent months, but Lakeland Electric plans to keep the customer rate steady and “over-recover” costs for a few months because it has a big bill coming due soon. LE will need to pay the state Department of Transportation $3.46 million in January for the removal of a 3-mile natural gas pipeline as part of the reconstruction of the Interstate 4/State Road 33 interchange.

Bombard said overall, Lakeland Electric’s customer rates are still among the lowest in the state and the recent financial hits have not changed that.

Holdener said RICE project has run into difficulties related to supply chains, labor shortages and inflation, but the significant underground work needed to prepare the site for the generators is nearly complete.

The City Commission voted Monday to authorize payment of up to $62.8 million to Rayco Industrial, Inc. for the next phase of the project – “above-ground” work that includes unloading, inspecting and installing the generators; manufacturing ducts; completing electrical connections and testing.

The Rayco contract is included in the revised $174.4 million project total.

Commissioner Mike Musick emphasized that the overruns are due to national economic trends. “No one wants to pay more, but nobody can also deny that there’s a reason why we’re paying more. It’s not shortsightedness on our part as elected officials or our team missing something,” he said at the commission meeting.

Once it starts operating, the RICE engine facility is expected to contribute 120 megawatts per hour to Lakeland Electric’s power generation as one of several sources of electricity.

McIntosh Unit 5 is expected to continue operating for another decade, with a generating capacity of about 359 megawatts per hour during the summer and 405 megawatts per hour during the winter. LE also has smaller plants including the Larsen Power Plant, which generates 115 megawatts per hour.

The RICE engines, Unit 5 and Larsen plant are all fueled by natural gas. Lakeland Electric has used liquid natural gas to generate the overwhelming majority of its electricity since decommissioning McIntosh Unit 3, its last coal-fired plant, in 2021 after repairs became too costly.

LE’s solar fields only provide about 14.7 megawatts of power per hour and its diesels provide about 5 megawatts.

CORRECTION: Lakeland Electric provided updated figures on Monday, clarifying that the overrun is $29.4 million, not $19.4 million as LkldNow previously reported.