Florida's shape and utility regulation play a role in keeping the state in lights, says power company chairman.
By LOUIS HAU
Published August 21, 2003
ST. PETERSBURG - Florida is less vulnerable than other parts of the country to problems from out-of-state electric power grids, but that doesn't rule out the threat of large-scale blackouts, Progress Energy Inc. chairman and chief executive Bill Cavanaugh said Wednesday.
Meeting with the editorial board of the St. Petersburg Times, Cavanaugh said Florida's peninsular shape helps minimize its exposure to transmission problems elsewhere, noting that Texas and Michigan enjoy similar advantages. But he said this relative isolation also requires that the state's utilities work to ensure they can meet their own power needs.
Asked if Florida could ever experience a massive power failure of the scale seen a week ago in parts of the Northeast and Upper Midwest, Cavanaugh said it was impossible to say until further details are available about the cause.
"Until I know, I would not say it couldn't happen here," he said. "That'd be foolish for me to say."
Cavanaugh said the blackout pointed to the risks posed by the deregulation of electricity markets. Progress' electric utility subsidiaries - Progress Energy Carolinas Inc. of Raleigh, N.C., and Progress Energy Florida Inc. of St. Petersburg - operate in regulated markets and have monopolies in their service territories.
"I think (regulated) systems today are in much better shape than the systems that have thrown it open to basically everybody," he said.
For electric utilities, transmission lines "are probably the most difficult thing to build," he said, because of not-in-my-backyard resistance. Cavanaugh acknowledged that putting up a new transmission line yields a lower return on a utility's investment than construction of a power plant, but he denied that this difference played a role in Progress' spending choices.
"When it comes to our decisions with regard to generation or transmission or distribution, we make those decisions on the basis of what we are supposed to do in terms of providing good customer service," he said.
Cavanaugh also said an expanded role for Washington isn't the answer to weaknesses in the nation's power grid. "I find it hard to believe the federal government is going to take on the job that the states have been trying to do," he said.
After the meeting, Cavanaugh said Progress is continuing to address concerns of debt-ratings agencies that have criticized the company for not making more headway in reducing debt. The company hopes to lower its ratio of debt to total capital to 56 percent by the end of 2005, from 59 percent at the end of this year, he said.
Cavanaugh also said Progress is seeking to draw lessons from its losing standoff with the state office of public counsel over the size of a rate refund the company owed its customers. The Florida Public Service Commission last month ordered Progress to pay its customers an additional refund of $18-million by the end of October. The acrimonious dispute included allegations, denied by Progress Energy, of improper contact by the utility's representatives with members of the commission.
Progress president and chief operating officer Robert McGehee is preparing an internal report on the matter, Cavanaugh said.
"You always learn from situations like that," he said. "We're relatively new to the Florida regulatory scene, and things aren't necessarily the way they are in the Carolinas ... We stubbed our toes a couple times and we don't want to do that again."
- Louis Hau can be reached at hau@sptimes.com or 813 226-3404
