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Episode #86: 'Keeping Electricity Affordable Among High Energy Costs' With Jacob Williams, CEO and General Manager of FMPA [an Energy Central Power Perspectives™ Podcast]

Americans are hurting economically in recent months, with prices for everything in the monthly budget rising more than previously expected. Utilities have not been immune to the tough financial situation, as fuel prices continue to rise and show unpredictable volatility, but for most households and businesses they are unable to reasonably do anything about their energy budget beyond typical energy conservation practices. With prices rising, it is the responsibility of the utility providers to manage costs and as much as possible shield their customers from unexpected bill increases, but doing so is no easy feat.

That's the situation that Jacob Williams, CEO and GM of Florida Municipal Power Agency (FMPA) finds him and his teams in, especially as the hot Florida summer approaches and brings with it higher power demand across all service areas. In his second appearance on the Power Perspectives Podcast, Jacob shares insights on the tools that utilities in the Sunshine State can use to manage their costs, bring affordable electricity to their customers, and ensure simultaneous goals of reliability and decarbonization aren't sacrificed in the meantime. Listen in as Jacob chats with podcast host Jason Price and producer Matt Chester about what utilities will need to do in the coming months.

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Thanks to the sponsor of this episode of the Energy Central Power Perspectives Podcast: West Monroe. 

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TRANSCRIPT

Jason Price: 

Hello, and welcome once again to the Energy Central Power Perspectives Podcast. This is the show that brings to you hot topics in the utility sector as discussed by the leading minds in the industry, the very people who are transforming and modernized the energy systems and the utility industry of the future. And a quick thank you to West Monroe, our sponsor of today's show. Now, let's talk energy.

Jason Price: 
I'm Jason Price, Energy Central Podcast host and director with West Monroe, and I'm coming to you from New York City. As always, I'm joined today by the producer of this podcast and Energy Central community manager, Matt Chester dialing in from Orlando, Florida.

Jason Price: 
Matt, the energy sector these days seems to be going through a number of varying priorities for how to modernize and upgrade the power sector. But one of the most important topics has to still be customers, and customers are being put through a lot. Care to share some background on this?

Matt Chester: 
Of course, Jason. The economic struggles for Americans have become too common of a theme recently, starting with the pandemic and the fallout that came with that. But continuing here two years later as energy prices surge, commodities are strained because of global conflicts, and the bills these customers receive seemingly on the rise without much recourse. So while inflation is one of the most dominant stories in the news acknowledging that prices for everything seem to be rising, national energy price days are actually surging well above those inflation levels, increasing anywhere from 100% to 260% year over year. And according to their June data, the US Bureau of Labor Statistics confirms these challenges, reporting that Americans spent 12% more on their power bills in May 2022 than they did a year before. This problem, it's ever present for customers, especially those operating on fixed budgets and in lower income communities.

Jason Price: 
Thanks for that review, Matt. It's truly a notable trend and one that utility stakeholders want to see addressed. So our guest today is joining us from Florida, just down the street from you, Matt. And while Florida may be known colloquially as The Sunshine State, it is actually more dependent on natural gas generation than any other state its size in the United States. And as utilities phase out coal and add more solar, natural gas will play an even more significant role for these utilities who need reliable backup generation. But as natural gas prices rise, this could spell more issues for customers.

Jason Price: 
So what are Florida utilities doing to keep costs affordable while moving towards that clean energy transition? We're going to hear specifically about Florida's municipal utilities as we're joined today by Jacob Williams, the general manager and CEO of Florida Municipal Power Agency. Our regular listeners will remember Jacob from an appearance on the podcast back in January of 2021. That was Episode 30, called Keeping Municipal Power Affordable While Adding Solar, where Jacob highlighted these important topics and the unique role that municipal utilities had to play. It's obviously a complex and critical topic, so we're excited to welcome back to dive even deeper this time. As its 35 years of experience in the industry serves as a well of knowledge, we're eager to tap into it once again.

Jason Price: 
So Jacob Williams, welcome back to the Energy Central Power Perspectives Podcast.

Jacob Williams: 
Thank you, Jason and Matt. It's great to be with you. Unfortunately, as you've laid out, these are a bit more challenging times as energy prices have rolled up significantly and natural gas prices in particular have rolled up, which means we're raising cost to all customers in Florida, whether they're served by a municipal or a cooperative or an IOU. The state of Florida is just so depends on natural gas, so it's a tough time right now.

Jason Price: 
So Jacob, let's set the stage. For the last several months, energy prices have been rising as Matt pointed out. So how are these wider national trends impacting Florida and the typical Florida family? And can they expect these increases to continue?

Jacob Williams: 
Sure. Yeah, certainly Florida because 75% rising to 80% of our generation is tied to natural gas. Florida cost structure has moved up significantly over the last year. We're up 250%. We were as much up to 300% in energy prices at one point for natural gas. So as a result, the customer bills are increasing. If you look at our member city bills to their customers, they're going to be up anywhere from 15 to as much as 40% year over year. Let's say the July bill, when the peak pricing rolls in bills and to customers. It is a challenge for families. The way we like to think about it is an average family is now paying about $4,000 more per year for energy, gasoline, home heating, and air conditioning and electricity, et cetera. That's tough. Couple that with, as you pointed out, energy prices drive the inflation in the country, and so the food and everything else has to go up because energy's such a big component of them. So we got another $3,000-$4,000 a year in increased cost to a family for food and groceries, and it's a challenging time for customers in general.

Jason Price: 
This dependency on natural gas. Share with us, how did we get to this point? With a state like Florida and its size and The Sunshine State, how did we get to this? And what are the trends likely to continue?

Jacob Williams: 
Well, the trends, we've been moving away. The state of Florida has been moving away from coal for the last 10 or so years. And that's in relation to as the shale gas revolution came in, natural gas was so low cost essentially it's driven the coal units out of the Florida market. Florida is so far removed from the coal field so that we're kind of the place you would expect coal plants to fall away, because we got to pay a lot in transportation costs to get it here. So the coal plants have moved away. About 10% of the generation in the state is nuclear. We're 2-3% solar. We're going to grow to 7-10% in the next five years, but the state has moved progressively more towards natural gas.

Jacob Williams: 
The other thing that occurred of course is as gas prices got low, all the diesel units that used to run in the state, those are all backed off and many of them retired. So we've gotten very heavy natural gas in the last 15 years in Florida, and it's allowed the state to provide low-cost power to everybody. It was a great economic decision at the time. Unfortunately, the energy decisions at the federal level have changed dramatically here in the recent couple of years, and all of a sudden you've seen prices start to rise for some very fundamental changes in the market.

Jason Price: 
Right. When we were preparing for this conversation, you had mentioned that the slogan Sunshine State is a bit of a misnomer. Especially if you're living in Florida, you would know that. So for the rest of us who don't live in Florida, why is that a misnomer in terms of why solar isn't taking off and accelerating to the level that maybe perhaps it should be or could be?

Jacob Williams: 
Well, few good reasons. One is, as you said, Florida is called The Sunshine State. At spring break time, it is The Sunshine State. Unfortunately, when the summer loads are here, every afternoon most summers, Matt, you know a rainstorms coming. The five or 10 minute hurricane as we like to call it down here. Because the clouds and the humidity builds up, and it's going to get cloudy and rain. So right at when loads are peaking, solar quite often isn't there, and the cloud cover comes and goes all afternoon and evening in Florida in the summer. And summer's really June through October, so a significant period. We're not nearly as sunny as Arizona or parts of Southern California. So again, at spring break we're The Sunshine State, but not so much in the summer. We're 25% less sunny than Arizona.

Jacob Williams: 
The other thing that you got to remember, Florida, while we're going to grow the solar, a massive amount of solar growth is coming in, Florida does not have a lot of land available. So we're going to have to manage this interesting situation of all the people wanting to move down here. You've got Lake Okeechobee, the Everglades, Ocala National Forest, all these areas. So you start to look around and you say, "Well, we've only got so much land available." If you want to grow to the massive levels that they talk about in other parts of the country, you'd have to tell places like The Villages to stop growing because the land won't be available.

Jacob Williams: 
So it's an interesting challenge, because Florida's not a big state. It's thin, and everybody was on the coast. There's only so much land in the interior that you could actually build solar out on. So it's manageable. We're going to keep growing solar, but it's not 100% solution down here in Florida.

Jason Price: 
Sure. I was just going to open it up if your fellow Floridian on the call ... Matt, have any comment on your experiences in the Orlando, the central part of the state?

Matt Chester: 
As soon as Jason mentioned that, I looked outside and I see the clouds rolling over. You can usually set your watch to the 2:00 or 3:00 PM storms here. I'm in a townhouse, so I'm not allowed to have solar panels. But if I did, those would definitely always be a factor to consider.

Jason Price: 
Yeah. Jacob back to you know. At FMPA, you're speaking for small, medium and large municipal utilities across the state, not the major IOUs. So what are the unique considerations municipal utilities must take when looking to lessen the financial burden of these rising energy prices on customers, and what role does FMP play in those efforts?

Jacob Williams: 
Yeah, it's good question. Because we're owned by the cities ... There's 31 cities that are members of FMPA, and we supply 24 of those cities either partially or fully electricity. But the interesting thing is the rate making decisions of what to charge is set at the city council utility board level, and there's very direct input from the citizens. They can walk into a city council meeting and say, "My rates are too high," and they politically feel the pressure. It's different from an IOU where you go argue up in Tallahassee in front of commissioners up there. Local residents aren't going to drive across the state to go to Tallahassee, where our member cities get very direct feedback. So our members are focused to ensure we have low-cost power. That is the number one driver.

Jacob Williams: 
So with this challenging price regime that's going on in the natural gas world, they're looking for assistance in any way they can, and we've been able to deliver some things. One of the things that our cities would say is, "We can't tolerate 30%, 40%, 50% price increases." Florida leads the nation in terms of the percentage of fixed-income population with all the retirees, plus your normal low-income population, so we have such a large population that really can't afford to have major fluctuations in their power bills. Those are all issues that our cities pound home to us all the time saying we've got to manage this well, because they're going to feel the brunt of it locally.

Jason Price: 
Yeah. That's a challenge for sure. We've been talking about affordability. I'd like to move the conversation over to reliability. How does reliability intersect with keeping costs affordable? How is FMPA and its members working to ensure reliable power for its customers?

Jacob Williams: 
Yeah. In the state, there's a planning reserve that goes anywhere from 15% to 20% reserve margin, and all the utilities in the state take it very seriously. We do the same thing. We ensure that we've got plenty of reserve capacity available and have done that. We're actually in the middle of an acquisition of some more gas peaking units to further add to our reserves and to cover our new load growth. That's coming online. So we're looking to acquire some new units, but it's something we all take very seriously.

Jacob Williams: 
Obviously, if you go back to Winter Storm Uri in Texas, those concerns about what if temperatures got low in Florida in December, January, February, how would Florida handle that? We're doing a lot of work in terms of backup fuel, a lot of diesel fuel backup. We have several units that can go onto diesel fuel and limit our exposure on the natural gas side. But we do take it very seriously. In Florida, we can't fail in terms of meeting the needs, because the hottest summer days, if you don't have electricity, that is not a good situation for Floridians.

Jason Price: 
That's interesting, so let's explore that a little bit further. The movement is to move towards clean energy, and you just mentioned more capacity from gas generation. I mean, how are you balancing clean energy future and the energy transition with what's going on today?

Jacob Williams: 
Yeah. The member cities have Said, "We want to continually get better and more on a path to essentially have a 50% reduction in CO2 emissions from the '05 levels by 2027." So we're going to more than double the amount of solar we've already got contracted for the next three or four years. That'll get us to 5-7% of our energy from solar, but we're going to be very much tied to natural gas and the gas units become all that more critical. We're going to retire two coal units in Orlando in 2025 and 2027. We're third owners in those facilities. We're replacing that capacity that goes away with natural gas capacity just because it can be responsive.

Jacob Williams: 
So even as we add solar, we need the backup sources still in place, especially on a cold winter morning. There's no solar in Florida, and yet we could have our peak loads on 7:00 the morning on a January day. So you got to have all the generation just like normal, even if you had a bunch of solar. And again, as we talked about in the afternoon in the summer, our loads could be peaking out right now. But as Matt pointed out, the clouds are here. The humidity and heat are still on the ground. So nobody's changing their consumption, but the clouds have wiped out your resource. So you've got to have the gas units to back everything up. And unfortunately, it's going to be critical for the country that natural gas prices stay affordable as opposed to where they're at right now in the $6, $7, $8 range.

Jason Price: 
Yeah. It's a juggling act for certain states like Florida and elsewhere. It's somewhat of a unique problem that you're facing that other utilities, say, in the Northeast or Midwest or the mountain states don't necessarily encounter. So can imagine it being a bit of a challenge.

Jacob Williams: 
Yeah. Up in the Northeast, they've got their own set of challenges. Their customers pay double what we do for electricity down here. So you can't walk away from ... just say, "Let's just be reliable and skip affordability." Because as we talked about before, Floridians use twice as much of electricity per person as people in the Northeast or California, because it's hot and humid. So we've got to be both reliable but affordable, because if we're not, like the Northeast, if our prices double what they are currently, customers would struggle and we probably wouldn't have 22 million Floridians down there.

Jason Price: 
Right. Well, I'm going to give you the last word. But before we get to that, Jacob, we have something called the lightning round. I don't think we had this the first time you were on the show. It's where we would ask you a series of questions, and you have one word or phrase response. And this is an opportunity for our listeners at Energy Central to learn more about you, Jacob Williams the person and not Jacob Williams of FPA. So are you ready?

Jacob Williams: 
Yep. Okay. I am ready.

Jason Price: 
Okay. What time of day are you most productive?

Jacob Williams: 
Generally in the morning, eight-nine o'clock. I get up and run right away or work out right away. So after I get done with that and then get settled in, that's the most productive time.

Jason Price: 
Favorite way to spend a Sunday afternoon?

Jacob Williams: 
Favorite way to spend a Sunday afternoon. Generally, we would leave church and have our daughters over for a family dinner on Sunday afternoon at the house, and quite often might end up watching a movie or doing something with them after that. But it's with my wife and two of our four children who live down here in Florida. That's our typical Sunday afternoon.

Jason Price: 
Favorite hidden gem in Florida?

Jacob Williams: 
I'm going to give you two of them. One is a very local, hidden gem. We live in the Lake Nona area of Orlando, and there's a park just about three miles from one of the major expressways. It's called Moss Park. It's in Orange County. And you think you were in another world, way away from all the tourists, all the hustle and bustle of Orlando. Huge oak trees, Spanish moss, an island where the birds have a rookery out there in the springtime. It's just a beautiful park. It's actually an isthmus there, too. Lakes on each side, and so you run between the two of them. But that's only a mile and a half from our house, so we go riding our bikes down there all the time.

Jacob Williams: 
The second place, a little bit further out is Mount Dora, Florida. Mount Dora is this unique little resort-ish kind of town that has actually topography. It has a hill, comes down, and you feel like you're actually in the Midwest at, let's say, a resort town on lake Michigan up in Mackinaw Island or something like that. It has the same feel because you're you're right up against the water. You walk around, shopping district and all that, right on the water. It's just a unique place for people to go.

Jason Price: 
Sounds beautiful. Best piece of advice you've ever gotten?

Jacob Williams: 
Especially for the current role I've had, one of the best piece of advice is when you're trying to get boards and people to make decisions, you've got to understand there's two important things. Number one is it comes down to timing. There's times that some certain solutions are not the right time to bring up because the group's not ready for it. So you got to have both the right time and you got to have the right solution. Quite often, I see people who they want to jam something through, and you got to say, "Look, it's just not the right time. The right solution, but we're not ready for that." And in the last five, six years, I've had to manage that quite often. John Maxwell was always a big proponent of saying you got to get both of those right or else you're going to have a bad outcome. Leaders are going to have bad outcomes. It's come in handy so often.

Jason Price: 
And what are you most passionate about?

Jacob Williams: 
What I do every day. Love the fact of bringing low-cost energy to Floridians, that we impact the lives of people in ways that they'll never understand. But if we do our job right, we impact 2.7 million Floridians in terms of giving them more disposable income to have a higher quality of life, to put into education, to do all those other things. So I'm passionate about bringing affordable, reliable energy to our cities.

Jason Price: 
Well said. Thank you, Jacob, for those thoughts. We're going to leave you with the last word. Talking to your peers in the industry, what would you like to leave with them?

Jacob Williams: 
I guess I'd like to leave with, again, kind of what we've said. We want to be able to provide affordable energy to our citizens. And Florida, it's so dependent on natural gas. The thing I would leave with is this country has to come to a decision, to have the political will to add gas and oil wells to increase production and to put more pipelines in the ground to bring the cost of natural gas and gasoline down. We have the resources in this country, but we must have the political will to do that. If we do not, there is a lot of pain for all consumers in the United States, and it's unfortunately an unforced error. We are living in this generation's energy crisis, not unlike the 1970s. The difference is OPEC curtailed supply in the '70s. Today, it is United States decisions being made that are curtailing our own production or not meeting the growing demands that the world is starving for energy and we could supply.

Jacob Williams: 
So my plea to my peers is to make sure that all of the entities at the national level understand how important it is to have access to affordable energy, because first-world economies, they run on low-cost energy. They don't run on high-cost energy.

Jason Price: 
Well, we much appreciate your insight and your thoughts and perspectives here. And I'm sure we'll once again have you on the show, like you have your second time graciously joined us. So thank you so much for sharing your insight, and we look forward to having you back on the podcast real soon.

Jacob Williams: 
All right. Thank you.

Jason Price: 
Absolutely. You can always reach Jacob through the Energy Central platform where he welcomes your questions and comments. We also want to give a shout out to our podcast sponsors that made today's episode possible. Thanks to West Monroe. West Monroe works with the nation's largest electric, gas, and water utilities and their telecommunication, grid modernization, and digital and workforce transformations. West Monroe brings a multidisciplinary team that blends utility, operations, and technology expertise to address modernizing aging infrastructure, advisory on transportation electrification, ADMS deployments, data and analytics, and cybersecurity.

Jason Price: 
Once again, I'm your host, Jason Price. Plug in and stay fully charged in the discussion by hopping into the community at energycentral.com, and we'll see you next time at the Energy Central Power Perspectives Podcast.

 

About Energy Central Podcasts

The ‘Energy Central Power Perspectives™ Podcast’ features conversations with thought leaders in the utility sector. At least twice monthly, we connect with an Energy Central Power Industry Network community member to discuss compelling topics that impact professionals who work in the power industry. Some podcasts may be a continuation of thought-provoking posts or discussions started in the community or with an industry leader that is interested in sharing their expertise and doing a deeper dive into hot topics or issues relevant to the industry.

The ‘Energy Central Power Perspectives™ Podcast’ is the premiere podcast series from Energy Central, a Power Industry Network of Communities built specifically for professionals in the electric power industry and a place where professionals can share, learn, and connect in a collaborative environment. Supported by leading industry organizations, our mission is to help global power industry professionals work better. Since 1995, we’ve been a trusted news and information source for professionals working in the power industry, and today our managed communities are a place for lively discussions, debates, and analysis to take place. If you’re not yet a member, visit www.EnergyCentral.com to register for free and join over 200,000 of your peers working in the power industry.

The Energy Central Power Perspectives™ Podcast is hosted by Jason Price, Community Ambassador of Energy Central. Jason is a Business Development Executive at West Monroe, working in the East Coast Energy and Utilities Group. Jason is joined in the podcast booth by the producer of the podcast, Matt Chester, who is also the Community Manager of Energy Central and energy analyst/independent consultant in energy policy, markets, and technology.  

If you want to be a guest on a future episode of the Energy Central Power Perspectives™ Podcast, let us know! We’ll be pulling guests from our community members who submit engaging content that gets our community talking, and perhaps that next guest will be you! Likewise, if you see an article submitted by a fellow Energy Central community member that you’d like to see broken down in more detail in a conversation, feel free to send us a note to nominate them.  For more information, contact us at [email protected]. Podcast interviews are free for Expert Members and professionals who work for a utility.  We have package offers available for solution providers and vendors. 

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