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If you’ve ever been sucker-punched by an unexpected car repair or an emergency plumbing bill, then you have some idea how city commissioners felt when they got an urgent email from City Manager Shawn Sherrouse at 5:47 p.m. on Monday.
The brief message said he needed to authorize an “emergency purchase in excess of $21 million” for major repairs to Lakeland Electric’s McIntosh Power Plant Unit 5. The next morning, he sent a memo with more information.
The natural gas-powered unit, which produced 64% of the utility’s electricity last year, lurched to a halt on Feb. 23 and has been out of commission ever since. But it wasn’t until March 31 that the full extent of the damage became clear, and not until late afternoon on April 10 when the price tag – which had bounced as high as $30 million – was locked in at $21 million, according to Sherrouse and Lakeland Electric General Manager Mike Beckham.
At an agenda study on Friday, commissioners shared their reactions:
- “That’s a huge sticker shock when you get that emergency expenditure,” Commissioner Stephanie Madden said.
- “The number is obviously daunting,” Commissioner Sara McCarley said. “I just was sort of taken off guard … That’s a lot of money to try to wrap my head around.”
- “So this was a complete shocker to everybody?” Commissioner Sam Simmons asked.
Beckham said Unit 5 is not expected to be functional again until late June, but repairing it is far more cost effective than any alternative. And in the meantime, utility customers should not experience any disruptions because LE has agreements with nearby utility companies including the Orlando Utilities Commission to buy power in times of need.
“We will be able to purchase power and make up for the lost capacity,” he said.
However, in his memo to the commissioners, Sherrouse cautioned that short-term purchase agreements are “never as favorable” as generating one’s own electricity and prices can be “quite high” during the summer months when demand peaks.
When Unit 5 was taken offline for about a month from Nov. 6 to Dec. 9, 2021, the city spent $2.2 million to buy 50,594 megawatt hours of power from OUC to make it up.
The current outage is expected to be closer to four months. In addition, energy prices have risen since 2021, population growth and development have increased demand for electricity, and warmer months are more expensive.
The final cost may change, but LE spokeswoman Cathryn Lacy told LkldNow: “We expect our Purchase Power Agreements will be $37.5 million through June, as compared to $19.4 million for the same months last year.”
What went wrong
Beckham said when Unit 5 failed, “it made some noise,” but it wasn’t immediately apparent how serious the problem was.
“We would have liked to put it back online because we had a (planned) outage scheduled one week later,” he said. “But we heard some rub in there that just didn’t sound right, so we went ahead and did some borescope exams.” Then LE staff removed the “gigantic steel shell” on top and did further investigation.
Ultimately a team from Siemens, the manufacturer of the unit, had to completely disassemble the turbine to figure out what happened.
Sherrouse wrote: “Upon full disassembly of the machine, damage to the compressor section of the combustion turbine was found to be extensive and would require removing the rotor and transporting it to Siemens’ shop in Charlotte, NC for repair.”
The cause was most likely failure of 16-inch metal expansion bellows used to cool the air in the rotor, according to Kevin Robinson, LE’s Operations Manager.
“When it failed, It created some air differentials, which caused a displacement of air inside the compressor and caused it to stall,” Robinson said. “When it stalled it created major damage in the compressor downstream.”
Sherrouse said the bellows were original equipment that had been in service for 22 years.
McCarley asked Beckham if the commissioners could have been warned sooner. “We heard about it Monday, and now we’re here on Friday. So did we know at the end of March that it was going to be this huge of an expenditure?”
Beckham shook his head.
“This literally went from ‘we might be able to put it back online,’ to ‘it might be something between $4 and $10 million worth of damage,’ to now the number we’re looking at is $21 million,” he said.
Beckham said the analysis by Siemens took a month and the results came back on March 31, several hours after the Utility Committee’s most recent meeting. Negotiations with Siemens over the cost of the repair also took time.
“By the time we got all of that package together, knew exactly what it was going to be and had a not-to-exceed scope … it was over the weekend, into Monday and Tuesday,” he said. “There was no point we could have come to the Utility Committee and said this is what it is, and this is how much it’s going to cost.”
‘No alternatives’ to repairing Unit 5
Beckham said Unit 5 was due to be taken offline for maintenance in 2024. While Siemens is working on the rotor in Charlotte, LE crews are using the unplanned downtime to accomplish some of those tasks now instead of next year.
McIntosh Unit 5 has been Lakeland’s single-biggest generator of electricity since May 2002. Although repairing it is expensive, Beckham said any alternative would be far more so.
Unit 5 – not to be confused with the recently imploded Unit 3 – is expected to stay in service for at least another decade. It has a generating capacity of about 359 megawatts per hour during the summer and 405 megawatts per hour during the winter, according to Lacy.
“That is our flagship; our major unit,” Beckham said. “We’re depending on Unit 5 to get us at least 10 years. That would get it to its 30-year life cycle, and some of these units run beyond their 30-year life cycle.”
Lakeland Electric broke ground last year on a $155 million “next generation” power plant that will feature six 680,000-pound RICE (Reciprocating Internal Combustion Engine) generators. Lacy said the plant is expected to become operational in the third quarter of 2024.
Commissioner Madden asked how the $21 million repair cost for Unit 5’s turbine would compare with purchasing another RICE engine.
Beckham said another reciprocating engine would cost about the same as the repair, but each RICE only generates about 20 megawatts per hour, compared with more than 350 megawatts for Unit 5.
“The rule of thumb used to be $1 million per megawatt, but it’s more than that now,” Beckham said. “So in the past you could buy a unit like Unit 5 for $350 million, but it’s well beyond that now.”
In his memo to commissioners, Sherrouse said: “There are no alternatives to repairing McIntosh Power Plant Unit 5 if we are to keep it operating, and our Ten-Year Site Plan anticipates that we will do that for the next decade.”
Paying the tab
Toward the end of the discussion, Simmons asked, “Is there any insurance for this?”
He and the other commissioners were heartened to learn that the utility equipment is insured and Lakeland Electric has been in contact with an adjuster.
“We will be filing an insurance claim for this,” Beckham said. However, he added it will likely be two to three years before the city receives any money.
In the meantime, several commissioners asked about options for paying the unexpected costs.
Sherrouse said there are funds from the municipal utility bond issued for the RICE engines, however no firm decisions have been made.
“In terms of the funding, we have a few options that we’re considering,” Sherrouse said. “We’re not ready to have that conversation just yet, but it’s coming.”
He said he would discuss options in one-on-one meetings with commissioners next week.
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I think LE has about 200,000 customers. So $21M is only about $8 per month per customer for one year.. bing bang bow; good to go- back to work everyone.