BY MARK SCHUMANN

In a letter to the editors of the Palm Beach Post, Florida Municipal Electric Association Executive Director, Barry Moline, accused Florida Power & Light of making misleading rate comparisons in its newspaper advertising.  Specifically, Moline said, FPL does not have “anywhere near” the lowest bills across a broad range of residential, commercial and industrial rates.

The full text of Moline’s letter can be read at: http://www.palmbeachpost.com/news/news/opinion/letters-fpl-wrong-to-claim-that-it-has-the-lowest-/nWzfz/

Accentuating his company’s rate advantage, FPL Chief Executive Officer, Eric Silagy, recently offered investors his version of how discussions began with Vero Beach officials.  According to Silagy, the city’s business leaders approached FPL in response to the company’s advertising, which he said helped clarify the extent of the rate differential.

Others remember differently the chain of events leading to the recent signing of a sales agreement between the city and FPL.  One former city official recalled how discontent over rates among the city’s county customers had been brewing for years.  Finally, in 2010, a newly seated city council approached FPL asking to begin negotiations.

Silagy also told investors Florida Governor Rick Scott is approaching officials with the state’s remaining municipal utilities and cooperatives urging them to sell to FPL.  Over the course of the past week the governor’s office has declined to respond to request from InsideVero for a comment on Silagy’s remarks.

When Vero Beach last attempted to sell its electric system in the late 1970s, anti-trust regulators blocked the deal.  Now, some within the municipal power community are looking at FPL’s move to acquire Vero Beach’s electric utility, not as an isolated opportunity for the company to expand its customer base, but as a larger, perhaps well-orchestrated effort to acquire most, if not all of the state’s remaining municipally owned utilities.

Florida Trend reported this month that FPL Vice President of Development and Public Affairs, Pam Rauch, denied the company has any strategy for acquiring municipal utilities, apparently contradicting Silagy’s presentation to investors.

“They must either grow or be acquired,” said one Vero Beach official, commenting on the motivations FPL’s parent company, NextEra Energy, might have for buying more municipal utilities.

Before other dominos can fall into FPL’s hands, though, the company must first close on its deal with Vero Beach.  Except for FPL representatives, who have made numerous reassuring statements about the prospects of a January 2014 closing, no one close to the negotiations is talking about the task ahead as being anything less than “arduous.”

Beyond needing approval from the Justice Department, the Federal Energy Agency and the Florida Public Service Commission, the deal must be cleared by the FMPA board of directors and by bond trustees representing bondholders in three Florida Municipal Power Agency projects of which Vero Beach remains a member.

Unwilling to risk the tax-exempt status of its revenue bonds, FMPA officials have told city leaders they will insist on a ruling from the Internal Revenue Service before clearing the deal.

Another issue that may hold up the sale is a provision in the power purchase agreement between FPL, Vero Beach and the Orlando Utilities Commission.  That agreement calls for the OUC to assume the city’s FMPA power entitlements in exchange for $34 million in cash plus the assignment of some $10 million worth of gas transmission rights.

The proposed power transfer and assignment of bond obligations from Vero Beach to the OUC would be straightforward enough, except that the agreement also calls for FPL to buy power from the OUC for three years.

Only under special circumstances can electricity generated at power plants funded with tax-exempt bonds cannot be sold to investor-owned utilities such as FPL.  Consequently, FMPA officials have made it clear they will not approve the deal without first receiving a ruling from the IRS.

FMPA leaders maintain that to loose the tax-exempt status of their bonds would be catastrophic for the organization, its member cities and its bondholders.

Another obstacle to the sale is the need to satisfy the FMPA’s requirement that Vero Beach’s remaining contingent liabilities is covered after the sale.  Essentially, the question is who will step in to meet the city’s obligations, if the OUC should falter.

While the prospect of the OUC stumbling seems remote, insuring that Vero Beach’s contingent liability is covered remains an issue for the FMPA.  Understandably, the group is unwilling to ask its members and investors to assume additional risk.

Some have suggested a logical solution would be for FPL to take on Vero Beach’s liability as a part of the deal, but FPL has to date been unwilling to agree to stand in for the city.

Further complicating the prospects of a successful closing, any resolution of the contingent liability issue that substantially increases the city’s costs may nullify the results of the March 12 referendum.  That referendum asked voters to approve the sales agreement on the table, or one substantially similar to it.

Any substantive changes in the deal, then, could require a second referendum.  Either way, if the city and FPL try to close on a deal substantially different from the one approved by voters, they may face a legal challenge.  “If that were the case, this could have litigation written all over it,” one city official said, speaking off the record.

In an apparent effort to quiet dissent, City Councilwoman Tracy Carroll at the last Council meeting warned her fellow Council members against “tortious interference of contract.”  In addition to quoting from a letter sent from the city’s transactional attorney at the city’s request, Turner offered specific examples of what she said the transactional attorney believed would be bad faith on the part of city officials.

“I get it. You are trying to shut me up,” responded Councilman Jay Kramer. “Well, it’s not going to work.  There is a lot wrong with this contract, and I am going to keep pointing it out.”