Lakeland Electric will spend $9.2M to purchase power from OUC to meet summer peak demand

Lakeland Electric will spend $9.2 million over the next two years to ensure it has the power necessary for customers to keep their lights on and air conditioners cranked up in the summer heat.Lakeland commissioners unanimously approved extending the municipal-owned utility's power purchase agreement with the Orlando Utilities Commission on Monday through Dec. 31, 2026.

"It will give us a couple of years to bring in more resources and, from my understanding, renewable resources we are a looking at specifically that we don't have at this time," said Paul Shipp, LE's power resources manager.

After shuttering its coal-powered McIntosh Unit 3, Lakeland Electric signed a $23.4 million deal with OUC to provide electricity to the city starting in April 2021. The power purchase agreement was designed to bridge a power gap from the time when Unit 3 was decommissioned to the launch of the utility's new reciprocating internal combustion engines. The RICE engine plant was initially expected to come online in 2023.

When Unit 3 was decommissioned, the nearly 40-year-old generator was capable of producing up to 360 megawatts of electricity for Lakeland homes and businesses. Former LE General Manager Joel Ivy had predicated at that time the utility would be approximately 135 megawatts short of meeting the city's peak energy needs.

In 2021, Lakeland Electric's peak summer load hit 692 megawatts. The city's needs have continued to grow over time, reaching a peak summer demand of 752 megawatts last year, based on LE's reports.

"The whole state of Florida surprised everybody," Shipp said. "The temperature was high last year and we had a 752 peak last year."

With Unit 3 shuttered, Lakeland Electric has the maximum capacity to generate up to 675 megawatts of power, according to General Manager Mike Beckham. With the OUC deal, the utility has access to 790 megawatts — enough to meet peak power demands and have a reserves.

Lakeland Electric's new plant, consisting of six RICE engines, is anticipated to begin the process of commissioning and producing power in November. Once it comes online, LE will have the capacity to produce 778 megawatts of power.

The issue is Lakeland is growing fast, and so is its demand for power. Even at a conservative estimate of 1% growth per year, Lakeland Electric predicts it will need 783 megawatts of power to meet summer peak by 2028. In the past five years, the utility's peak demand has grown between 1.6% to 6.8% per year.

The two-year extension to Lakeland Electric's agreement with OUC will secure access to 100 megawatts of additional power capacity during the summer months of June to September — bringing its total to 885 megawatts. It will secure 50 megawatts of generating capacity the rest of the year. The $9.2 million price tag covers the cost of security the generation capacity and its transmission, but does not include the actual power purchased.

Ideally, Lakeland Electric should aim to produce 80% of its own power and purchase 20% through a shared power pool or grid with other utilities, Shipp said.

"Ideally, we'd like to be there. We would like to generate most of our own power and purchase the 20% or so form the pool," he said.

Last year, Shipp said the municipal utility produced about 55% of the power needed to meet its customers' needs. This partly caused by a 60-day outage of natural gas-powered McIntosh Unit 5, the utility's main baseload generator capable of producing up to 405 megawatts.

Required maintenance or repairs is one of the most common reasons that electrical utilities take their generators offline and purchase power from other utilities, Shipp said.

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LE customers should not worry about a loss of power or black outs, Beckham said. Lakeland Electric ensures it has a reserve margin of power and is interconnected with other electrical utilities, including Duke Energy and TECO.

"It would really take a major, major event for us to lose not only our own power but every opportunity to connect with someone else to bring it," he said. "It would be a major grid event, not just a Lakeland grid event."

Commissioner Stephanie Madden questioned whether the utility company's estimate of 1% growth in peak power demand each year was sufficient given the area's rapid growth and increasingly hot summer weather.

"We are chasing that capacity, which is going up faster than anyone thought, and you have to serve that capacity," Beckham said.

Shipp said he thinks Lakeland Electric will be able to continue to meet peak demands in the future, but may have to purchase more power down the road. The utility's purchase agreement with OUC can be extended in one-year increments, or more, by both parties mutual agreement.

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

This article originally appeared on The Ledger: Lakeland Electric will spend $9.2M to secure power for summer peak