BY MARK SCHUMANN

Responding to pressure to bring down electric rates, City of Lake Worth officials put the Florida Municipal Power Agency on notice that, rather than renewing a wholesale power agreement set to expire in 2014, they would seek alternative bids.  Lake Worth officials also resolved to consider other options, including a possible sale of the city’s electric utility.

In order to buy time to fully consider long-term solutions to meeting the power needs of the city’s 22,000 customers, Lake Worth leaders went looking for the best short-term power contract they could find on the open market.

Earlier this week, the Lake Worth City Council accepted an offer from the Orlando Utilities Commission, choosing the FMPA members utility over four other bidders, including Florida Power & Light.

Lake Worth’s deal with the OUC is for three years, with two one-year renewal options.  Having solved their short-term power needs, Lake Worth officials then moved to direct the city’s Utilities Commission to explore three alternatives for lowering rates long-term.

As Lake Worth officials see it, their choices are to negotiate a less expensive long-term wholesale power contract, repower the city generating facility, or sell the electric system.

As a starting point in determining which approach would best benefit the city and its electric customers, the Lake Worth Utilities Commission will issue requests for proposals from qualified bidders who might be interested in providing wholesale power, purchasing the system outright, or running it on behalf of the city.

One option that surfaced in the recent bidding was a proposal from Wartsila North America to modernize the city’s power plant with four new gas generators, and to run the system for the city.  This proposal appeared to offer the lowest rates long-term, but would require a significant upfront capital investment.

Ironically, FPL, which has a service territory adjacent to Lake Worth, and which advertises that it offers the lowest rates in the state, did not make the most competitive offer in the recent bidding.

Clearly FPL would prefer to buy the Lake Worth system, just as it is attempting to buy Vero Electric.  But rather than rolling out the red carpet for FPL, as Vero Beach officials did, Lake Worth leaders are playing it cool, resolving instead to conduct a thorough, open, all-comers-welcome bidding process.

One frequent criticism of Vero Beach’s approach to selling its electric system is that the City Council never issued a formal, well-publicized request for bids.  Instead, the city narrowly circulated a restrictive bid request that many feel was intended to dissuade all potential bidders with the exception of FPL.

In the case of the sale of Vero Electric, the city signed an exclusive letter of intent with FPL before ever seriously seeking other offers. When the bids to purchase Lake Worth’s system are finally in, it will be telling to discover how FPL’s offer stacks up in a competitive bidding process.

Should Lake Worth choose not to repower its plant, or to sell its system, the city will join 46 other Florida cities and power cooperatives that purchase power wholesale and then resell it to their customers.

Vero Beach City Councilman Jay Kramer has argued for more than a year now that the city of Vero Beach could run its system without a power plant, either by upgrading transmission capacity into the city, or by selling off its 22,000 county customers.

Currently, Vero Electric’s power plant is only run to meet peak loads on extremely hot or cold days.  As a result, the city’s generators sit idle 88 percent of the time.

Vero Beach is much farther down the road than Lake Worth in settling on a path to lower electric rates.  But unlike Lake Worth leaders, Vero Beach officials, at least the three-person Council majority of Tracy Carroll, Craig Fletcher and Pilar Turner, resolved from the beginning to get the city out of the utility business. Other options were never seriously considered.

Lake Worth leaders may be no less uncomfortable with their city’s dependence on utility revenues to help pay for the cost of running the city, but they are not loath to admit that without the utility revenue the city would have to drastically raise taxes, cut city services, or both.

With the Vero Beach City Council set to sign a binding sales contract with FPL as early as Feb. 18, the lessons that might be learned from Lake Worth’s strategy may become nothing more than historical footnotes.

On the other hand, if Lake Worth’s more deliberative approach to exploring its options, and its seeking of more qualified bidders lands them a much better deal than Vero Beach can ink with FPL, then Carroll, Fletcher and Turner may have to ditch any plans to co-author a book on effective negotiating.