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The Ultimate CEOs: Lewis Hay III, FPL Group

The CEO Power Forum: Not all utility CEOs are created equal...

Fortnightly Magazine - June 2005

competitive markets. We do participate in a number of competitive markets. As you know, Florida Power & Light is in a regulated market. I think the jury is still out on the benefits of competitive markets. We haven't seen significantly lower prices in competitive markets than in regulated markets. In fact, I could argue that you have seen the exact opposite in many cases. It seems that customers are still questioning the benefits of competitive markets.

I saw an article a few weeks ago where large industrial customers were complaining about the costs they were incurring essentially caused from increased costs caused by regional transmission organizations. It's hard for me to say where the market is going. I think the genie is out of the bottle, so to speak. I don't think the markets that have gone competitive are going to reverse course. But I don't see a lot of compelling data for the markets that are currently regulated to deregulate. So, it's not clear to me that even if we have more consolidation that's going to change that dynamic or balance between competitive and regulated markets.

Fortnightly According to press materials, in late March, FPL Group announced the purchase of a Texas retail group called GEXA as an entry to retail competitive markets in Texas. What's the value proposition?

Hay I really can't comment too much on GEXA because we are in a quiet period. The objective of us entering competitive markets was frankly to learn more about the competitive business in the event Florida ever deregulated that we would be down the learning curve in terms of knowing how to compete under a different set of rules. But we also felt that we were a good operator of power plants and that the wholesale generation business in particular is a commodity business, and to be successful in commodity businesses you have to be a good operator. In fact, you have to be a low-cost operator. Based on a lot of benchmarking data that we did, we feel that we qualify. We felt we had the skill base necessary to compete, and so far we think that strategy is proving out.

Fortnightly In the face of high gas prices and tougher proposed environmental rules, what is the ideal fuel mix to meet future electricity demand?

Hay I think fuel mix is a question that every CEO of a utility in America is struggling with right now. There are not a lot of good alternatives for us. As you mention, natural gas is becoming scarcer. The prices are much higher than they were a few years ago, and most people are expecting them to stay high. Coal comes with very high capital costs, and at least at the moment a very uncertain regulatory future when it comes to environmental regulations. So, it's not the most attractive alternative.

I think a lot of us would like to see new nuclear plants built, but there is still too much regulatory uncertainty there. Nobody wants to have the same problems that the last wave of