COMMENTARY

“The problem for Heran, though, is that he has been carrying FPL’s water for years, and the utility giant would rather play the long game in hopes of walking away with everything.  More to the point, though, it seem likely FPL is using its negotiations for Vero Electric as a way to crack the FMPA contracts, so that it can then march across the state buying up one municipal utility after another.  In a presentation to investors last spring, FPL President Eric Silagy made clear his appetite for acquiring municipal utilities.”

MARK SCHUMANN

Glenn Heran, utility activist and president of the Taxpayers Association, issued a red-letter “Call to Action” Sunday, apparently in response to City Councilman Richard Winger’s proposal to hire another outside law firm to give the city a second opinion on how best to structure a deal to sell Vero Electric.

Heran’s diatribe is naïve, simplistic, and disingenuous, and is laden with wishful thinking.  The president of the Taxpayers Association may be making claims he believes to be true, but his “Call to Action” is so full of inaccuracies that it is challenging to determine where best to begin a critique.

From the start of the effort to sell Vero Electric, Heran has been either dismissive, or ignorant of the contractual obligations Vero Beach made to its fellow Florida Municipal Power Agency members, and more importantly, to the joint action agency’s bondholders.

Clearly, Heran has yet to comprehend the fact that the long-term pledges Vero Beach made to participate in billion dollar power projects are more akin to getting married than they are like simply choosing to live with someone.

In a “Call to Action” that rings with the tone of a child frustrated at not getting his or her way, Heran claimed the FMPA has rejected “reasonable offers” to dispose of Vero Beach’s FMPA contracts.  In truth, all four parties to the negotiations (Vero Beach, the FMPA, Florida Power & Light and the Orlando Utilities Commission) now agree the original power transfer agreements signed last fall would likely not meet with Internal Revenue Service approval.

Heran may be unhappy with the fact that power generated by plants funded with tax-exempt bonds cannot be sold without restriction to investor owned utilities such as FPL, but the law is what it is, and the FMPA is hardly to blame for that.

Among Heran’s questionable statements is the assertion that all 33 municipally owned utilities in Florida are inefficient, and cannot compete with FPL.  Heran is parroting a claim that comes straight out of FPL’s publication relations playbook.  It is simply not true.

Sounding like a fundamentalist Libertarian, Heran seems to believe it is un-American for cities to own their own utilities.  Yet, in other cities that own and operate electric utilities leaders are generally supportive of municipal power.

In fact, Vero Beach is the only city in Florida actively negotiating to sell its electric system.  Widespread discontent with municipal power simply does not exist.  Heran knows as much, which is why he is now proposing to “fight” the FMPA by spending public money to conduct a statewide effort to sow seeds of discontent.

Heran speaks and writes with an air of absolute assurance that belies the fact he has in the past been off course by as much as 180 degrees. Aided by a local daily newspaper that publishes his many “guest” columns and never fails to cite his credentials as a Certified Public Accountant, Heran is seen as a utility expert in the the eyes of those who do not yet know any better.

Perhaps because they work for a newspaper whose publisher is married to a key FPL employee, the editors and reporters of the Press Journal have remained silent on Heran’s unrealistic projections, just as they have yet to report that the negotiations are now so far off track Heran felt compelled to take what can only been seen as an act of desperation.

In 2009, Dr. Stephen Faherty was presenting a financial model he attributed to Heran showing the city would net $156.5 million on the sale of Vero Electric, which, he said, would lead to a boost in the general fund of some $600,000 a year.  On these and similarly rosy projections, Heran and Faherty first built community support for selling the electric system.

At least in terms of the consequence of the sale on the city’s budget, Heran and Faherty were tragically wrong.  The city’s will be lucky to net $3 million on the sale, not $156.5 million.  Rather than gaining $600,000 in investment income, the city will lose some $5.6 million each year now transferred from the electric fund to the general fund.

Regarding Heran’s C.P.A. badge, perhaps it is instructive to remember than an army of C.P.A.s at the now defunct accounting firm of Arthur Anderson did a poor job of protecting investors in ENRON.

Even if Heran’s plan to hire a public relations firm to “direct and support activism in other (FMPA) member cities” is ultimately successful in bringing down the FMPA, which seems highly unlikely, the campaign will, at the very least, take years to conduct.

All the while, Vero Electric’s county customers, about whom Heran and the leaders of Taxpayers Association claim to be so concerned, will continue as customers of the city.  If Heran and the Taxpayers Association are as committed to securing rate relief for the city’s 22,000 county customers as they claim to be, they would stop resisting the concept of a partial sale.

A plan for a partial sale is more likely to meet with the approval of FMPA’s bond trustees, and could lead to lower rates for the city’s county customers much sooner that would a sale of the full system, assuming a sale of all 34,000 Vero Electric customers will ever be possible.

The problem for Heran, though, is that he has been carrying FPL’s water for years, and the utility giant would rather play the long game in hopes of walking away with everything.  More to the point, though, it seem likely FPL is using its negotiations for Vero Electric as a way to crack the FMPA contracts, so that it can then march across the state buying up one municipal utility after another.  In a presentation to investors last spring, FPL President Eric Silagy made clear his appetite for acquiring municipal utilities.

Silagy said, “FPL’s opportunity to grow earnings comes from a variety of sources, including: Base rate increases and settlement agreement: Service territory volume growth; Wholesale/service territory expansion.”

Silagy added, “One of the things that’s happened is I’ve now got the governor of Florida going around to the munis saying, ‘Why aren’t you selling yourself to FPL?’”

Winger’s proposal to seek a second legal opinion on how best to negotiate the sale of Vero Electric makes sense, especially given that the Council troika of Tracy Carroll, Craig Fletcher and Pilar Turner is not likely to agree to sack the transactional attorneys.

That move has even more merit, though, for by refusing to recognize and address the failings of the transactional attorneys, the Council may well be exposing the city to liability for not bringing the deal to closure.