Suncoast Business Forum; Jeffrey Lyash

This special presentation was produced in high definition by W. edu Tampa St. Petersburg Sarasota. There's no one exactly like you. No one has the same financial goals or cares about the same people. That's why Raymond James financial advisors have the independence to offer unbiased advice that's right. And that's why we pioneered the idea of finance. Plan. You might say were just. Seems individual solutions from some top advisors. When you flip a light switch the lights go on. It's something we take for granted. You don't think about whether the electricity is generated by coal oil natural gas or nuclear power. But there are thousands of people who are focused on just that. And they're part of Florida's energy infrastructure and they play a vital role in our economic and geo political future. Find out what it takes to run one of Florida's largest electric utility companies. Next. And some close business for you.

Providing electricity for more than five million people from here to the panhandle is the core business of Progress Energy Florida. What started as a small St. Petersburg Electric Company in 1899 is now a multi billion dollar corporation. The future of Florida and that of Progress Energy Florida are closely linked in many ways. At the center of the company's Florida operations is CEO Jeffrey Lai ash. Geoff welcome to the Suncoast business forum. Glad to be here. Now providing electricity for five million people is obviously very energy intensive and with the price of fossil fuels being as volatile as they have been how do you strategize

about making electricity affordable. Yeah this is a central focus for us where we're very sensitive and very sensitive to the price of electricity and the impact that has on the lives of our customers the health of our communities and of our economy here in Florida in the country. We think about this short term and long term short term. We do everything we can to manage a diverse fuel supply from diverse sources delivered by a diverse set of means to hold the price down. But you know the price of fossil fuels is rising it's likely to continue to rise. So we think of it long term. Long term means having a balanced solution. Energy efficiency helping our customers use less use energy more wisely to hold down their cost developing alternative energy supplies solar wind biomass hydrogen and investing in State of the art facilities that are very very efficient. The close the gap that can't be closed with efficiency and alternative or animals and that mean

things means things like Advance coal high efficiency natural gas plants and nuclear power which is our lowest most stable fuel cost. The volatility we've seen lately though it seems that that it's hard to plan for oil going from from $30 a barrel to $140 a barrel in a couple years and then back to 50. Yeah it certainly is. That's why over the last couple of decades we've really migrated away from oil as a fuel source toward coal natural gas and nuclear and to try to minimize the volatility that we suffer there. We buy short and long term contracts financial hedges we try to have a diverse fuel supplies so that we can compete one against the other to try to stabilize as much of that as we can. But volatile on rising fossil fuel prices are something I'm afraid we're all going to have to face together over the next couple of decades. Now you've worked in the electric utility field since you graduated from college is this something that you thought you might be doing when you were a kid growing up.

Yeah well honestly no. I would say as a kid growing up I was always interested in math and science always had my hands into something whether it was rebuilding engines or water or constructing things. And so I was sort of a hands on individual who like math and science I gravitated toward engineering. The opportunities I saw early had to do with the electric power sector looked interesting. I got engaged and a few decades later here I am. Well let's talk about your childhood your family would you grow up. I grew up in a small coal town in north central Pennsylvania called Shimoga and I'm sure all of your visitors have heard of that. Sure sure how can we talk about all the time. Yeah. Very hardworking community. Populated by people who who mostly immigrated here from around the world back at the turn of the century. People with you know with very high personal standards very hardworking or very compassionate. Just a great place to grow up.

Now whether any folks that you look back on your childhood who are who are strong influences and you any family members. Oh yeah well I have a large family and I can tell you that every one of them has had a great influence on me. Parents siblings if I had to pick one I'd say my grandmother grandmother my grandmother is not yet 100 but she's working on it. She's about five feet two of Irish concrete and she has very high standards which she tells me to my entire life. Well that's a good role model now you attended Drexel University after you after you left high school. I soon you studied engineering. I did. I did yeah. I graduated from high school and and decided to enter engineering as a field. You know I had some influences as I went through grade school and high school teachers maybe one in particular who helped steer me in that direction. And and so I went to Drexel studied mechanical engineering. I would tell you that as I went through high school I had

I had intended to study engineering but I had a high school teacher named Bob who was an engineer. Engineering graduate of Notre Dame who left his career to come back and teach at his high school alma mater. I you know saw something in me in terms of skills and aptitude and sort of guided me in the last two years of high school toward toward this career. And I wound up taking some of his advice confirm first by some input from my parents and headed off in that direction. Well what is it you think about that that Bob saw that it that others saw that that really made you well-suited for what you're doing. You know I I think it's I think it's really an aptitude in math and science but an ability to take that and apply it to to make it applied in a creative way or apply it in a way that that makes a difference. And I think they saw that aptitude and encouragement. So after Drexel you then went to Pennsylvania power unlike you my right. That's correct and what was your

role there. I started with Pennsylvania Power Light at a power station an old coal station and then ultimately went to be a construction and started test engineer at a nuclear power plant they were constructing at the time. And that is really how I made the transition from engineering into the power business and then began to focus on nuclear power as one of the principal elements of my career. So this is what period of time we're talking about. This is the early 80s 80 81 82. So after Pennsylvania Power Light you went to the Tennessee Valley Authority also in nuclear power now right. Yes I worked at the Browns Ferry facility in northern Alabama which is a three unit nuclear power station. And I left there to join the Nuclear Regulatory Commission which is the government agency that's responsible for the safe operation regulating the safe operation of our commercial nuclear fleet in this country. Now this again is in the 1980s and. How do you look at the public sentiment towards nuclear power in the United States. Back at that period time.

Well you know this is post Three Mile Island so there was a lot of trauma in the country a lot of emotion around that event and a lot of fear I think. And so public sentiment at that period of time really came away from a pro-nuclear sentiment and and had some real concerns. And so as a young engineer with this is my career you know I got to tell you I question whether this was the right alignment for me but understanding that technology in the role it can play in addressing things like fuel cost energy security and protecting the environment. It seemed to me at the time that the this in the long term would be an important part of our energy infrastructure. And so I elected to stay with it even though it was an unpopular public belief at the time. And it will sometimes sometimes unpopular things if they're right. Turn out to to prevail in the long run. And that's really the way I felt about nuclear power and about this power industry as being a

critical part of the quality of people's lives. And when you went to the Nuclear Regulatory Agency you left the industry side and you went to the government regulatory side. How is it making that transition from business into government regulation. Yeah well quite quite interesting. It's a it's a real shift in responsibilities. You I went to the government it's a regulatory safety inspection. An institution. So you were your motivations in a certain sense become much simpler. It was really a one dimensional focus and that was how do we ensure the quality and safety of licensing design and operation of these facilities and evaluating the performance of others in making that happen. And so it's a it is a much simpler but no less important focus than the focus on the business side. What would you see are the most important takeaways from those years you spent at the NRC. Yeah well I think it is that. That in any operation not just nuclear

but any operation. The the the objectives of being safe reliable and cost effective are not mutually exclusive they're complimentary. If you make the right set of the solutions. Now the development of nuclear power in the United States has differed significantly from how nuclear power has been developed for energy and other countries. Why is that and where do you think this is headed. Yeah well the nuclear industry in the US was really the leader for this worldwide in the 60s and 70s and even into the 80s. Our construction programs our design our operations really set the standard for the world. The world followed. And in fact as as we pulled away from our nuclear construction program the rest of the world did not. They continued and and have perfected their designs and their construction techniques and continued with the process. And really the U.S. participates in a global nuclear

industry today. And as we come back to the notion of constructing advanced reactors we're reengaging with the world to make sure that we're benefiting from their experience at this. He left the Nuclear Regulatory Agency went to her for Caroline Carolina Power and Light. So you're back in the industry side and you went to work in a nuclear plant I think I was having some difficulties at the time. All right. You know what really brought me to Carolina Power Light which is a predecessor to Progress Energy was that the Brunswick facility which is one of their nuclear plants was having some trouble some performance trouble in fact was shut down and trying to find how to recover and reestablish their performance at a world class level and I came to the company as part of the team. To to work with that plant and that workforce and take that from a troubled plant which ultimately we did to one of the best performing plants in the country if if not in the world. And that was that was my entry to

Carolina Power and Light. So you're part of a turnaround team. That's right. You see that as one of your strengths. Yeah I think it is. I think I enjoy people so much and I enjoy working with them helping them to a aspire to a very high standard helping them get there holding them and myself accountable when we don't reach it or we're celebrating with them when we do. And up a plant like that any plant that is struggling for performance. I guarantee you has the people with the talent. To to make that a successful operation. If you can just work with them and unlock that talent and get it applied productively. And I really enjoyed it and frankly I see that. I see those skills and I see that approaches as being equally applicable whether it's turning around a problem plant or just taking an organization from good to great.

After working on that nuclear power plant Caroline apparently you moved on to the transmission side of the business looking at transmission which is a huge area for electric utility companies. Do you think that the transmission infrastructure has kept up with the growing demand for electricity in the country. We have a fairly strong transmission system in this country but I think people don't understand how critical it is to the reliability and the delivery of all this energy we use. So frankly we have under built the transmission system as a country over the last couple of decades. You can think of this is the Interstate Highway System of energy. And so over the next couple of decades we have some catch up. We have some investment to make. We're going to need to build high voltage transmission across the country particularly in the southeast U.S. to make sure that as that demand for energy continues to increase we can not only generate it at that source whether it's wind solar nuclear or gas but we can deliver it to your house reliably. Day in and day out so transmit you'll see a significant amount of transmission construction on our system here in Florida over the next 10 years.

Several billion dollars worth. And nationally I believe now several years ago if you moved from the transmission side down here to St. Petersburg where you you took over as chief operating officer of Progress Energy Florida. What do you see what was the challenges that you saw with that position when you got here. Yeah well I came here to work for my predecessor Bill Haber Meyer wonderful man as chief operating officer. And the challenge that we had at the time was that historically the performance of this system the reliability of our Progress Energy System here in Florida the quality of our operations they were really were not up to the standard that we needed them to be. We had a wonderful workforce. We just needed to make sure that the leadership was strong enough and the direction was clear and often the standards high enough to deliver what our customers deserved and that's really what I came here to help Bill do. And you know I'm very proud of our workforce the progress that they've made over the last six years has been tremendous. We're safer we're more

efficient we're more cost effective or more reliable today than we were last year and will be more so next year than we are right now. Now there's a renewed interest particularly as we saw oil soar to $140 a barrel of renewed interest in alternative and renewable energy sources. How do you approach that and what's a pragmatic way for electric utility company to strategize renewable energy in this day and age. Yeah well I think as I said earlier we believe there are three elements of a balanced solution to our energy future all vitally important state of the art generating facilities like nuclear that we discussed. Energy efficiency which is just just critical helping our customers use energy more wisely and then development of alternative energies. We are strongly supportive of this as a matter of fact. The way we approach this is to partner with the university system USF UCSF us Florida State on promising technologies to study them pilot them develop them

and when they're practical and cost effective meaning that the price point is one that we think our customers can bear then we roll those out on a larger scale and that is going to be a challenge because a lot of these technologies while they hold promise in the long term are very expensive in the short term. So I tell people on alternative energies I need to do two things. I need you to lower your expectations in the near term for how impactful this will be. But I need you to raise your expectations in the long term. You should expect us to develop these and get them the ploy to where they make a real difference in the 10 to 20 year horizon. Well if you were to look out over the service area which is in your case half of the state of Florida. What mix of alternative or renewable energy sources do you see as being viable. Not maybe in the next two years but over the next 20 years. Yeah there's a range you know. Really I think biomass is a is a alternative energy source that we can exploit here in Florida which is which is taking wood waste crops that we grow and turning into bio oil or

gas that we can use to generate electricity. We have three of the largest biomass projects in the world under development right here in Florida for our company right now. So that's got promise. I think solar power has a long term promise. It is not cost effective today. But with the right technology development I believe it can be cost effective in the long term. And so we have a range of solar power projects from solar hot water heating which if you're our customer you can work with us and we'll install in your home today the solar photovoltaics to other more exotic technologies. And so I think that's got a lot of promise. We're doing some work on wind micro targets on shore wind in Florida as it is is not a very good resource at the present time but perhaps micro turbaned technology could be a help there. And of course alternate transportation technologies hydrogen fuel cell driven vehicles we have a small fleet of those we partner with Ford on. And we have plug in electric hybrids that we're piloting right now because we think. Those vehicles as a way to move away from

gasoline imported oil and those highly carbon impactful Transportation Technologies is something our customers are going to want and we're going to have to support. Now in in the past few years there's been significant growth in the population of Florida and that's something that you have to study that's something you have to model because you have to build the capacity to support the growth that has traditionally been part of Florida. Lately the growth has slowed rather dramatically. How do you anticipate this working out over time. How do you model for these fluctuations in the Florida population. And you know in this business we think in terms of decades and at the same time we think in terms of the near future we because we really have to so serve both masters. And so yes the Florida had seen 60 percent growth for a period of years that is really unsustainable growth. We never planned for that to continue because it couldn't continue. Right now what we're seeing is a very flattening of that growth and we expect that to persist probably through 2009 and into 2010 I hope it comes

back quicker but but I wouldn't bank on it. But that's not sustainable either Florida still a great place to live and work. As we work through this economic crisis which we will as a state and as a country the growth in Florida will return to what is its long term natural trajectory. And that is that two to three percent growth year in year out over the long term. We've seen cycles like this in a company in Florida before in the 80s during the Savings and Loan crisis in the 70s during the oral oil embargo. And that period of stagflation we saw where we saw rapid growth followed by flat or negative growth and then ultimately a return to the stable long term growth pattern. And the trick for us is to deal with the short term without taking our eye off that long term goal. Over the last hundred years Progress Energy and its predecessor companies have played a critical role in the development of the west coast of Florida and the surrounding communities. But as a

corporation as a CEO of a large corporation how do you see your role in the community. Well we never. Our company our employees. We can never do better than the community we serve. So the communities we serve have got to be successful for us as a company to be successful in not only in terms of our business but our employees live in these communities. So for employees to have successful lives for us to attract and retain a successful workforce we've got to have a vibrant growing diverse culturally strong communities. It's because of that conviction that our company takes such an active role in nonprofit institutions civic organizations infrastructure development economic development and recruitment because our that our business and the communities we serve are just inexorably linked. Now from a personal standpoint how do you view being philanthropic and more involved in the community.

I've got a personal obligation. I've got a business obligation I've got a personal obligation I mentioned to you earlier that one of the strong influences on me was my grandmother. And you know my grandmother still calls me every week or so and we have a nice little chat and she asked me two questions each and every time. Question number one are you treating Tracy Well that's my wife. We've been married for 26 years. And the second question she asks me is what have you done this week to help someone else. And I'm going to tell you I better have an answer and it better be specific. So that is sort of a personal conviction that she helped install with me. And and so I've got an obligation to discharge that. And I try to do that by getting involved in the community where we live where the community we serve with. Organizations or activities that I think are going to make a difference in people's lives. And there's a long list of the ones they've been involved in but one that's that's very visible right now is you're chairing the committee that's studying the future of baseball in Pinellas County and

specifically in downtown St. Petersburg. How do you like sitting in that hot seat. Oh gosh. Well this is this is just a fascinating challenge I mean I took this on along with a team of 10 other corporate leaders and citizens in the community. And I think it's important. You know baseball can add such a such a great dimension to the quality of life in the Tampa Bay region that going to a baseball game is not a sporting event it's a social event. It's a place where families ought to be able to go. Those are nights that your children ought to remember for the rest of their lives. And so taking on an issue like this and helping the community to sort through what's important. And what do we want to do to preserve baseball is an important part of our community in the long term. That's really what this is about. And I think we'll we'll work through controversial issues about do we need a new stadium where do we need the stadium what design who will pay what sort of fan support. What sort of corporate

support are necessary. Our objective is to work through all that make sure people have the information they understand the alternatives and then to help the community as a whole make decisions on what's the right course here. If you were to look out over the let's say the next 15 20 years which of course you do how do you see Florida's energy mix coming together and also the companies that provide it. I mean you imagine they'll be the same companies will there be mergers consolidations How do you see the the mix evolving. It is hard to say. I think the energy business because of its scale the advantage you get from scale and scope and aggregating diversity of supply. By its nature will always be a large company business. I think I think you very well could see some consolidation across the country. In Florida here we have strong companies with strong traditions Strong investor owned utilities like Progress Energy or TECO here in

Hillsborough County. Strong municipal and cooperative power agencies and so I my my belief is that over the next 10 or 20 years you may very well see those companies continue existing standalone but what you'll see is a higher degree of cooperation and a higher degree of integration in our planning and our operations. Well Jeff I would like to thank you for joining us today and being our guest. Oh you're quite welcome I really enjoyed speaking with you today. If you'd like some more information or you'd like to see this and other Suncoast business form interviews you can visit our website at W edu dot org slash SBA. Thanks for joining us for the Suncoast business for us.