Turning businesses ON
Why FPL’s energy incentive could juice the economy
IF ANY SINGLE ENTITY IN THE SUNshine State can “power up” the business economy, luring new industry and encouraging expansion, it ought to be Florida Power and Light. Now, thanks to support from state government and the state Public Service Commission, responsible for regulating power costs to consumers, it is. FPL has just introduced a new program to cut the costs of power to businesses in the company’s 35-county region. The requirements are simple: open a business, relocate a business or expand a business by creating at least 10 new jobs for each additional 350 kilowatts of power usage by June 1, 2013, and get four years of a big boost from FPL. “That level of power would be like supermarkets, hospitals, some manufacturing concerns, departments stores, that kind of thing,” explains Neil Nissan, a spokesman for FPL. The company introduced a much more stringent incentive program in the late 1990s — that one required adding at least 75 new jobs for every 1,000 new kilowatts of power use — but it failed to live up to expectations, he admits. Only two companies ever sought to take advantage of it in Florida. (He could not recall which ones.)
CARTWRIGHT The new program, however, is much more inclusive, he says. Businesses that qualify will save 20 percent of their power costs in the first year of operation, 15 percent in the second year, 10 percent in the third year and 5 percent in the final year of the incentive program.
Even better, for companies kicking off operations in industrial or commercial locations unoccupied for at least six months, the incentive program is five years, with a 25 percent cut the first year.
Economic proponents in Southwest Florida are cautiously optimistic that FPL’s new incentive will make a difference — and partly because the promised bottom line benefit will carry more weight than those numbers suggest. On the surface of it, the benefit is likely to range from a high of about $12,000 to roughly $9,500 per year in first-year savings for a company using about 350 kilowatts, Mr. Nissan says.
“Is this program going to be the single driver to bring a new company to the state?” asks Tim Cartwright, the new director of the Economic Development Council of Collier County, and a partner in Fifth Avenue Advisors.
“Well no, it’s not the silver bullet. But it certainly is a sweetener that every business owner must look at. Here’s the reason why:
“A grocery store, for example, operates on very slim margins. The normal rule of thumb of a business that has a 20 percent net margin, is that every dollar in cost savings is equal to $5 in sales. They have $5 in revenue, so they make $1, and that’s a 20-percent net margin. Turn the formula upside down and say, ‘What does $1 of cost savings mean to you?’”
It means a much more muscular bottom line, he notes.
“Whatever that bottom line number is, you can multiply it by five. If you have a utility cost of $1 million, then 20 percent is a very desirable margin. It equals $5 million of sales, because you’d have to hire a whole team to equal that $1 million on the bottom line.”
One of the keys to the new program, in addition to letting business owners both in and out of Florida know it exists, is coordinating it with other state or local incentive programs.
To that end, FPL has already hired a liaison — an economic development director — to work with both state and local government economic programs, Mr. Nissan says.
“He’s only been there 10 days, so he’s just getting his feet on the ground,” Mr. Nissan adds.
All of this appears very promising, says Jennifer Berg, spokeswoman for Lee County’s Office of Economic Development and the Fort Myers Regional Partnership.
“We’ve just begun to learn about the new FPL program ourselves, and we see it as another valuable tool in the tool box,” she explains.
“We have two different incentive programs already in place: the 15-year-old Lee County Job Opportunity Program to leverage state funds (80 percent) and add to them (20 percent from the County) based on the number of new jobs a company creates; and a set-aside fund for larger companies that create at least 75 new jobs. It started with $25 million in 2008, and there’s about $5 million left in it.”
Both Mr. Cartwright and Ms. Berg point out that counties increasingly work together to bring in businesses and to coordinate their programs with such new incentives as the FPL program.
“Companies looking to relocate don’t see county lines or boundaries,” Ms. Berg says. “If we locate a company to Lee or Charlotte or Collier or relocate companies to those counties, we all benefit. So we have partnered with all the counties from Sarasota to Collier in a marketing initiative — we try to stay in very close contact with the other directors.”
Although almost any business that can support new jobs is an enviable acquisition in the minds of economic development officials, they’re universally aiming to encourage those that are not serviceindustry related, they say.
“We’re not looking to attract retail or tourist-industry development, but we want research and development, aviation, those kinds of things — our mission is retention and expansion of high-wage, high-value jobs,” says Ms. Berg.
For a company, a move to take advantage of a pro-business environment begins with a site consultant, says Mr. Cartwright.
“The company hires a consultant, and the consultant always uses a matrix when showing different places where a move could be advantageous.
“Say there’s an appealing place in Alabama, one in Florida and one in Puerto Rico. They’ll go through the incentives and do plus or minus signs. When you total the score, the FPL program could be something that pushes business toward us. But it would be in consideration with all the other tools in the box.”
Already, says Mr. Nissan, about 10 companies have expressed an interest in the FPL program (he would not identify them).
As for a hit in the FPL bottom line should many companies take advantage of this, the company sees in the cost cutting as just good business.
“It’s the time we’re in, the economy. It’s a good time to offer these rates,” Mr. Nissan explains. “Anytime you can expand your base, you’ll have new jobs, you’ll have new economic development, and we see that as new customers and new business for us.” ¦