780 Amelia Island Parkway
Fernandina Beach, Florida 32034
Toll Free: (800) 427-7712
Web site: http://www.fpuc.com
Subsidiary of Chesapeake Utilities Corporation
Founded: 1924 as Palm Beach Company
Sales: $250.63 (2017 est.)
NAICS: 221112 Fossil Fuel Electric Power Generation; 221210 Natural Gas Distribution
Florida Public Utilities Company, Inc. (FPU), a subsidiary of the Chesapeake Utilities Corporation, provides electricity, natural gas, and propane to more than 120,000 customers in 39 Florida counties. The company owns nearly 3,000 miles of natural gas distribution mains. It does not generate its own electric power; instead, it buys energy from other utilities and distributes it to roughly 32,000 homes and businesses in the northern part of the state. For many years, FPU was a publicly traded, conservatively run company, an approach that allowed it to pay a dividend to shareholders for more than 60 consecutive years. However, during the 1990s it began an expansion effort, especially in the propane business, that led to its merger with Chesapeake in 2009. FPU has two notable subsidiaries: the Flo-Gas Corporation, which markets propane, and the Peninsula Pipeline Company, which transports natural gas.
FPU was founded in 1924 as the Palm Beach Gas Company. With 14 miles of gas mains, the company served 1,300 customers located in Palm Beach, West Palm Beach, and Lake Worth, Florida. Although gas companies during the 1800s had focused on lighting, with the rise of electricity during the early years of the 20th century, gas companies turned to cooking and heating applications. During the early 1900s gas ranges began replacing coal ranges because gas was a more efficient fuel that resulted in less waste. Moreover, gas required no hauling or clean-up like coal. Gas used to heat homes offered these same advantages and more: units were smaller, quicker to heat a room, and required far less maintenance.
Palm Beach Gas was just one of a multitude of small gas companies that cropped up to meet a community's cooking and heating needs, producing its product in local plants. Typically, gas was made by reducing coal to coke in a retort house, which was then piped to another facility where it was purified by lime. The gas was then piped to an immense tank called a gasholder or “gasometer,” from which it would be delivered to customers through the company's network of mains. This method of producing gas would remain essentially unchanged and predominant until natural gas provided by wells in the southwestern United States began to be distributed throughout the country by a vast network of pipelines.
During the 1930s FPU adjusted its business mix. In 1931 it shut down the Pensacola plant and three years later sold the Pensacola Gas business to the Gulf Power Co. The Key West operation was then divested in 1938. Meanwhile, FPU expanded beyond gas during this period. In 1935 it acquired the Southern States Power Company, which operated in Marianna and Fernandina Beach, Florida. The deal brought with it electric and water utilities, as well as ice assets. Although FPU would remain in the electricity and water businesses, ice would be phased out as electric refrigerators replaced iceboxes.
In April 1945 FPU underwent a change of ownership when Jesse L. Terry bought the company from the Consolidated Electric and Gas Company. In July 1946 he took FPU public. Another major development during the post–World War II period was the 1949 creation of the Flo-Gas Corporation, which supplied bottled propane gas to customers who lived too far from FPU's mains. However, a much bigger development in the gas industry was beginning to take place during this time: the rise of natural gas.
Natural gas, which was found like other petroleum products trapped within the earth's strata, became a viable product in the Southwest during the 1930s, and in fact had been used for centuries. However, natural gas was no better than manufactured gas because it was only available in its immediate area, limited to a local network of mains. That situation changed with the improvement of pipeline technology made necessary with the advent of World War II. Even before the United States entered the war, the government began preparing the country for its participation. A vital consideration was the protection of the petroleum products that a modern army, and economy, depended on. Given the success that German submarines enjoyed during World War I in disrupting shipping, it was deemed essential that the country build a pipeline system to deliver fuels underground.
The idea of establishing a pipeline system in the southeastern United States had been in the exploratory stages during the 1930s, but the prospect of war was the key factor in making the concept a reality. After the war the pipeline system was expanded, and during the 1950s natural gas provided by wells in the southwestern United States began to be distributed throughout the country. In Florida the primary reason for the introduction of natural gas during the 1950s was to fuel electric power plants. Eventually, residential gas customers were also converted from “town gas” to natural gas. FPU made the transition in 1959, when it began selling natural gas in Palm Beach County. Local gas plants became obsolete and were gradually closed during the 1960s. However, the property on which the plants had been located became a matter of concern for gas companies as local governments began forcing them to clean up leftover contaminants, a problem that FPU would face as well.
Although it held onto its water company operating in Fernandina Beach, FPU concentrated on building its natural gas assets during the 1960s. In 1965 it acquired the Sanford Gas Company and inherited some cleanup problems that would only come to the surface years later. In 1967 it added the Deland-based Florida Home Gas Company and its natural gas system. That same year FPU sold its Marianna water business to the North Florida Water Company. Thereafter, the company settled into a long stretch of conservative management, a period of more than 30 years in which FPU made no acquisitions and simply operated the assets in hand. It was generally the lowest cost provider in Florida and consistently turned a profit, maintaining an uninterrupted string of years in which it paid a dividend.
Replacing Cressman as CEO was 54-year-old Jack English, who also enjoyed a long tenure at FPU. A native of Long Island, English earned undergraduate and graduate degrees in electrical engineering from the Georgia Institute of Technology before joining the company in 1973 as a division superintendent in the Northeast Division. He was named vice president of the company in 1991, made senior vice president in 1993, and a year before Cressman retired, English took over as president and COO.
Although on one level English maintained the company's continuity in management, he recognized that FPU would have to become more aggressive to remain successful. In 2000 the company expanded its propane business to its northeastern Florida territories, but more importantly it began mapping plans for the future. FPU hired the consultant Decision Processes International and created a 13-person management team that by the end of the year determined a corporate strategy for the next five to seven years. Initially, the team planned to build on its infrastructure to offer additional products, but it soon became apparent that FPU was simply too small and lacked the necessary capital to launch major new products and services. Instead, FPU elected to expand on its customer base. Rather than sell more products, it would sell more of the same products to more energy customers, whether they be residential, commercial, or industrial. FPU planned to become a total energy company instead of a mere supplier of gas and electricity.
While management was developing its new strategy in 2000, FPU played an unwitting role in a hostile corporate takeover attempt. The AES Corp., the largest power plant developer in the United States, was attempting to gain control of CA Electricidad de Caracas, the largest power company in Venezuela, which was caught off guard by the unsolicited bid. In an attempt to ward off AES, Electricidad bought a 9.9 percent interest in FPU at a cost of $7 million. Because the Venezuelan company now owned more than a 5 percent stake in a U.S. power company, the maneuver hindered AES, which had to gain approval from the U.S. Securities and Exchange Commission before completing the deal. Electricidad made it clear that it had no intention of seeking control of FPU. However, despite this clever ploy, Electricidad eventually succumbed to the inevitable and was swallowed up by AES, and FPU returned to relative obscurity.
A major part of FPU's new business strategy was to grow its propane business. The goal was to acquire one propane company each year. English's first move in this effort was the 2001 purchase of Z-Gas Company, Inc., which had 1,100 customers in Nassau County in northeastern Florida. A few months later, FPU added the Nassau County propane business of Atlantic Utilities. In 2002 FPU acquired another propane business, purchasing Nature Coast Gas, Inc., of Inglis, Florida, a company with more than 1,300 customers.
The company's growth strategy, which focused on the energy industries, did not aim to expand on its water business, which was generating close to $3 million in annual revenues. When the city of Fernandina Beach offered in 2002 to buy the water division, management jumped at the opportunity to focus its efforts on energy while at the same time gaining more money to make further acquisitions. The two parties reached an agreement in December 2002 and closed the deal in March 2003. FPU received a total of $25 million, of which $19.2 million was in cash and the balance in future considerations.
FPU began displaying a more aggressive posture under English. In 2002 the company came into conflict with the Peoples Gas System, a subsidiary of the Tampa Electric Company. In 1991 the two companies had established a territorial agreement that divided Palm Beach County between them, but 11 years later Peoples Gas became upset when FPU built a gas line extension into Juno Beach, an area that Peoples Gas believed was its territory. They reworked their agreement, but found themselves in conflict again in 2004, as both vied to supply gas to a large research center that was being planned in Palm Beach County.
Meanwhile, the business world was taking note of FPU's rapid growth. In 2004 Fortune magazine named FPU as one of the 100 fastest-growing small companies in the United States, slotted at number 77, as its revenues grew from $88.5 million in 2002 to $102.7 million in 2003. That figure rose to $110 million in 2004, aided by a rate increase that was intended to defray the rising costs of pensions, employee benefits, and insurance payments. The company reported a net income of $3.6 million for 2004, which was a 44 percent gain over the prior year.
In 2005 FPU went before the Florida Public Service Commission seeking an increase in electricity rates for its customers on Amelia Island. A long-term contract that fixed power rates on the island at 1998 levels was due to expire. To head off the inevitable shock for its customers as fuel prices reverted to market rates, FPU made a novel proposal. It would impose a surcharge in the intervening time, setting up a rate stabilization fund. Credits from that fund would help customers defray the increased fuel supply rate beginning in 2007. The plan drew objections from the public, and the commission ultimately rejected the idea. Meanwhile, customers in Florida's northeastern region saw their bills rise 37 percent in early 2007, as the utility passed along its increased supply costs. The following year the public service commission approved a 7 percent base rate increase for FPU.
In April 2009 FPU announced plans to merge with the Chesapeake Utilities Corporation, a publicly traded company based in Delaware. Six months later FPU shareholders voted to approve the $73.4 million transaction, retiring FPU's stock and making the company a wholly owned subsidiary of Chesapeake, but retaining its name and operations. Besides its utility interests in the mid-Atlantic states and Ohio, Chesapeake operated in 23 Florida counties under the name Central Florida Gas, which was based in Winter Haven. English, the chair and CEO of FPU, retired under the deal, but stayed on as a consultant for an interim period.
Under its new ownership, FPU continued building its asset base through acquisitions. It picked up the natural gas unit of Indiantown Gas Company in 2010. It also sought further expansion in the unregulated energy market of propane distribution. Toward that end, in early 2012 FPU acquired Barefoot Bay, a community propane system in Indian River County, and its Flo-Gas unit acquired Crescent Propane of Newberry, west of Gainesville. The following year Flo-Gas bought the propane distributor Glades Gas.
In April 2012 FPU announced it would team up with its competitor Peoples Gas on a pipeline to parts of Nassau County and Amelia Island that had not previously had access to natural gas service. That summer, FPU sealed a 30-year franchise agreement with the city of Okeechobee to introduce natural gas to the area. In late 2013 FPU bought the natural gas distribution system from the city of Fort Meade, located in Polk County in the center of the state. The city manager said it had been a difficult decision to part with the municipally owned utility, but expressed assurance that the company could expand the system to meet the community's growing needs. As part of the deal, FPU sponsored an economic development summit in Fort Meade in 2014.
Updated, Roger K. Smith
Flo-Gas; Peninsula Pipeline Company.
Central Florida East; Central Florida West; Central Florida Gas; Indiantown Gas; Northeast Florida; Northwest Florida; South Florida.
NextEra Energy, Inc.; JEA Inc.; Tampa Electric Company.
Circelli, Deborah. “Ex-utility Chairman Franklin Cressman, Utility CEO (obituary).” Palm Beach (FL) Post, September 8, 2001.
Hart, Amelia A. “Rate Hike Is Meant to Lessen Rate Shock.” Florida Times-Union (Jacksonville, FL), October 12, 2005.
Hurst, Mary. “FPU Customers Facing Electricity Rate Increase.” Florida Times-Union (Jacksonville, FL), January 3, 2007.
Saito-Chung, David. “Chesapeake Sees Potential in Propane Gas.” Investor's Business Daily, November 8, 2010, B9.
Salisbury, Susan. “Utility Merger Approved.” Palm Beach Post (West Palm Beach, FL), October 23, 2009.
Swartz, Kristi E. “Fuel Fight.” Palm Beach Post (West Palm Beach, FL), June 6, 2004.
Turner, Kevin. “Your Electric Bill Will Be Going up Again.” Florida Times-Union (Jacksonville, FL), May 3, 2008.
Warfield, Andrew. “Florida Public Utilities to Relocate Headquarters to Wildlight in Nassau.” Jacksonville (FL) Daily Record, January 31, 2018.