Carroll, Fletcher and Turner are in a tug of war with reality, and the harder they pull on the rope, the tighter becomes the knot, and the more is spent on legal fees, and the more is wasted in unnecessarily high electric bills.

Backed by limited-government advocates who want to see the city absorbed by the county, and by developers who are hopeful a unified county government would be more likely to ease height restrictions, the Council troika now finds itself facing a Gordian Knot – a knot which cannot be untied.  The only solution is to slice through the knot and start over.

So let’s cut to the chase here: This utility deal will not take place as currently structured, regardless of what the sale’s most ardent supporters are telling the public.  Rather than continue wasting valuable time and the community’s money on unnecessarily high electric rates, it is now to move toward a real solution.

It is important to understand the two reasons why the deal will not take place. The city’s transactional attorneys have mishandled key provisions in dealings with the Florida Municipal Power Agency contracts, the first being the contingent liabilities. Unless Florida Power and Light takes on these liabilities, the deal is doomed.

Only another utility can assume these contingent liability. No other assurance will suffice, not even an insurance policy. It’s FPL or no one, and FPL has to date shown no willingness to assume these contingent liabilities, not even for a reduction in the purchase price.

The second reason the sale is doomed is the Internal Revenue Service restriction on the sale of FMPA power. The three-year power supply deal between Orlando Utilities Commission and FPL calls for FPL to pay the full cost of OUC’s power from the Stanton coal plants. The IRS, however, requires the power be sold at the market price, which is currently well below OUC’s full cost.

Carroll, Fletcher, Turner and their supporters can wait another year to recognize these problems, but in doing so they will be wasting more time and money on lawyers, and worse, they will be causing the city’s electric customers to spend $20 million more a year for power.  A much more responsible approach would be to act now to lower electric bills and remove the power plant from the river.

FPL representatives and the Council troika like to talk about “a path forward.”  Well, here is a more practical path forward, one that may not please FPL or the OUC, but is far more beneficial to the city, and to its 34,000 electric customers.

1. Sign no new agreements or contracts with anyone.

2. Pay OUC $20 million to extricate the city from the remainder of its 17-year above-market contract.  This $20 million would come from the proceeds from the sale of outside customers (see #6, below).

The OUC just made a wholesale power deal with the City of Lake Worth at rates about 9 percent below the rate at which it sells power to Vero Beach.  The difference comes to approximately $2 million a year.

3. Issue an RFP for a new power supply agreement, with length of term in the range of 3, 5, 7 and 10 years. The goal is to seek the lowest power supply available. OUC just gave Lake Worth a 5-year power supply deal that will drop Lake Worth’s rates to within 10% of FPL. Other cities have gotten great power deals recently, including Wauchula and Blountstown.  None of these cities are rushing to unload their valuable electric systems.

4. Issue an RFP to dismantle the power plant. Companies will pay the city to take it away, perhaps not much, but it will be income, not an expense.

5. Deal with the cost of any environmental remediation at the power plant site. Of course, what those costs will be depends on its ultimate use for the site, whether as a park or a development such as a marina resort. The decision about the land’s use should be left for another day, and will surely result in a vigorous public discussion. At a minimum, the city should clear the way for other options.

6. Issue an RFP for the 22,000 customers outside the city.  The city can expect a price in the range of double the annual revenues, or about $110 million. This is a common equation used by the Florida Public Service Commission for investor-owned utilities. On the low side, these 22,000 customers and the transmission and distribution system outside the city are worth at least $85 million.

The city could use the proceeds to pay off $49 million in power system debt, a $20-million OUC termination fee and environmental remediation for power plant cleanup. (Anyone content with the results of FPL’s phase one environmental study should check with the old timers about two vaults filled with asbestos, and PBC-contaminated debris said to be buried under the north end of the power plant.)

After also selling off its gas transmission right for $10 million, the city would be left with some $20 million to $30 million, in addition to about $17 million in reserves.

The city could then pay off $22 million in the pension shortfall and could convert to a defined contribution retirement plan. The city will have addressed all its financial, environmental and land development and aesthetic concerns and will walk away with some $15 million in the bank.

7. The new, smaller electric utility could then be run for the benefit of the citizens of Vero Beach.  The city could continue to examine opportunities to exit complicated contract provisions and could possibly sell the utility in the future. The city can even consider contracting out the electric operations as Winter Park has successfully done, which would make it much easier to cut ties with employees if and when that time comes.

Not everyone will like this approach. However, it solves the mess of contractual and financial problems and achieves the goal of removing the unsightly power plant from the river.

OUC and FPL will object to this approach, but only because their plans to pick the city’s bones clean will be thwarted.  It is important to remember that the City of Vero Beach doesn’t exist to satisfy OUC or FPL. The City Council must look out for the people of Vero Beach.

This plan will give FPL and OUC some of what they want. FPL will end up 22,000 customers and OUC will get paid $20 million to shorten its contract with Vero Beach. This is a reasonable plan forward that recognizes the difficult reality before the city – now a Gordian Knot – and chooses to affirmatively solve the problem together.