COMMENTARY

MARK SCHUMANN

Any doubt about Florida Power & Light’s willingness to selectively offer options to participate in its proposed Turkey Point 6 and 7 nuclear units as leverage in facilitating other negotiations was set to rest this week.

In a letter to the head of the Florida Municipal Power Agency, FPL President and C.E.O. Eric Silagy wrote, “Concurrently, FPL will enter into an option agreement with FMPA with respect to the participation of FMPA in up to 100 megawatts related to the construction of the Turkey Point Units 6 & 7 nuclear generating facilities.  The option agreement would be in substantially the same form as the option agreement that FPL has previously entered into with OUC (Orlando Utilities Commission).”

Silagy’s offer is contingent on the FMPA’s acceptance of a new proposal for the structure of the sale of Vero Electric to FPL.  Two earlier proposals, which the city’s transactional attorneys have been pursuing for nearly a year and at a cost of more than $1 million in legal fees, have been set aside as unworkable. Now, FPL appears to have taken charge of the negotiations and has put yet a third proposal on the table.

Again this week, Vero Beach 32963, the barrier island’s version of the National Enquirer, squandered its editorial page space on the attack.  The target this week was Lynne Larkin, a local attorney, former member of the City Council, and the author of the Vero Beach Civic Association’s filing with the Federal Energy Regulatory Commission.  The Civic Association is seeking a formal FERC hearing on the proposed sale of Vero Electric to Florida Power & Light.

In an editorial that was dense, dull and delusional, the island weekly sought to discredit Larkin’s assertion that FPL’s offer to the OUC for a nuclear option agreement may well have been given in exchange for the OUC willingness to help facilitate the sale of Vero Electric.

The relevant facts were published months ago in two stories on InsideVero.com, one on February 3 and a second May 27th.  In response to a subsequent public records request, the OUC provided copies of email correspondence dating back no farther than September 4, 2012, though by the OUC’s own admission discussions on the option agreement began in the spring of 2012.

If the editors and reporters of the island weekly are the experienced and tenacious investigative journalists they fancy themselves to be, then surely they realize not all vital communications are committed to writing.  Either the OUC carried on some five months of negotiations without any written communication, or the organization’s representatives are not being forthcoming.

Reading the following stories, any reasonable person can come to their own conclusion about the quid pro quo nature of the OUC/FPL option agreement.

Public records sought in FPL, OUC negotiations

MARK SCHUMANN

Published May 27, 2013

In August 2012, Florida Power & Light, the Orlando Utilities Commission and the City of Vero Beach announced agreement on a complex, and in the minds of many, an improbable power purchase agreement.  Aimed at clearing the way for the sale of Vero Electric to FPL, the deal is designed to relieve Vero Beach of its commitments to three FMPA power projects – St. Lucie Two, Stanton I and Stanton II.

The following month, FPL and the OUC signed off on an agreement giving the OUC the option to share in two new nuclear units FPL proposes to build at its Turkey Point plant in Dade County.  Spokespersons for both FPL and the OUC insist there is no connection between the OUC’s participation in the power purchase agreements and FPL’s awarding of an as-yet exclusive option agreement on the Turkey Point project.  In the minds of some in the the Florida municipal power industry, FPL and the OUC have some explaining to do.

Before Vero Beach can sell its electric system to FPL, it first had to find a qualified partner to assume is entitlements to the St. Lucie Two, Stanton I and Stanton II projects.  In an attempt to unload these debt service obligations and power purchase commitments to the FMPA, Vero Beach had earlier appealed to all of FMPA’s members.  But when it came to finding other cities willing to assume even fractional shares of Vero Beach’s obligations, the appeal led to little in the way of measurable results.

Late last spring, without other FMPA member cities willing to absorb Vero Beach’s power entitlements, the hoped-for sale of Vero Electric to FPL seems less probable with each passing day.  By early summer, sources close to the negotiations were giving less than 50/50 odds that a deal could be worked out.

In early June of last year, Vero Beach City Councilman Craig Fletcher, apparently anxious about the prospects of reaching a deal, announced on a local radio program that he planned to ask the Council to begin studying its options.  Fletcher reasoned that if a sale of the full system to FPL proved impossible, the city needed a “Plan B.”  Curiously, less than a week later Fletcher withdrew his request from the Council’s agenda.

Even more curiously, Fletcher went cold on exploring alternatives to a sale of the full system just about the time FPL and the OUC began discussions on an option agreement enabling the OUC to buy into FPL’s new Turkey Point 6 and 7 nuclear project.

Somewhere between going public with his concerns that a deal to sell Vero Electric to FPL may not come together, and then withdrawing the subject from the Council’s agenda less than a week later, did Fletcher receive word the OUC and FPL were finally talking turkey?

Then, in early August came news that the OUC had agreed to facilitate FPL’s acquisition of Vero Electric by assuming Vero Beach’s multi-decade debt service obligation as well as its indefinite commitment to buy power from three FMPA projects.  In exchange, the OUC is to receive $34 million in cash and an estimated $10 million in gas transmission rights, along with FPL’s guarantee to buy the power for three years.

An even more surprising announcement followed in October, when FPL reported to the Florida Public Service Commission that, in exchange for $10 (ten dollars), it has given the OUC an opportunity to participate in its proposed Turkey Point 6 & 7 nuclear project.  The news appeared for the first time in the last paragraph of an otherwise routine semi-annual report submitted by FPL to the PSC last October.

The news of FPL’s side deal with the OUC remained buried at the bottom of FPL’s report to the PSC until late last January, when Inside Vero reported, “FPL and OUC sign ‘nuclear option’ agreement.”

Had FPL and the OUC hoped to keep quiet their side deal?  One provision in the option agreement reads, “ Except as may be required by applicable law, the Parties shall not issue any press release or other public disclosure with respect to this Agreement or the transactions contemplated hereby without first affording the non-disclosing Parties the opportunity to review and comment on such press release or public disclosure.”

The revelation of FPL’s willingness to cooperate with the OUC on its new nuclear project came as a surprise to other municipal utilities and co-operatives, for they had also expressed an interest in buying into any expanded nuclear power output in Florida.

For the past several years, FPL has, at the insistence of the PSC, met semi-annually with representatives of municipal utilities, including the OUC, to update them on Turkey Point 6 & 7.   At each meeting, FPL’s scripted message has remained the same.  In the view of the utility giant, it was and is simply too early to begin specific conversations about what Turkey Point 6 & 7 power, if any, might be available for municipal utilities.

As it turned out, when FPL repeated this message to representatives of the state’s municipal utilities in the early fall of 2012, the company was, in fact, on the verge of revealing the OUC option agreement.  A little more than one month earlier, FPL had announced successful conclusion of the Vero Beach power purchase agreement involving the OUC.

Spokespersons for both the OUC and FPL insist there is no connection between FPL’s readiness to offer Turkey Point power and the OUC’s assent to the power purchase agreements with FPL and Vero Beach.  But some in the Florida municipal utility industry wonder if those explanations may not pass the sniff test.

After all, FPL’s discussions with the OUC for the option agreement on Turkey Point began about the same time the two utilities also got serious about finding a solution to Vero Beach’s FPMA commitments.

According to the billing records from Vero Beach’s transactional attorneys, negotiations with the OUC and FPL began in May and concluded in late July or early August.  Essentially, then, discussions between FPL and the OUC for the power purchase agreements coincided with negotiations for the option agreement on Turkey Point.

Explaining the timing of the negotiations, Tim Trudell, a spokesman for the OUC, wrote, “Last summer FPL’s new CEO (Eric Silagy) visited Orlando.  During the visit, after OUC asked about it – FPL suggested they would be willing to discuss an option for ownership (in Turkey Point 6 & 7).”

Last week, FPL spokesman Steven Scroggs met with representatives of the municipal utilities interested in Turkey Point, but this time the meeting was held via a conference call, rather than around a conference table.  As Scroggs presented an update on Turkey Point, representatives of the municipal utilities remained more or less silent.

The conversation became more animated, though, when Scroggs attempted to explain how and why FPL cut a side deal with the OUC for an option on a five percent interest in the Turkey Point project.  Scroggs said negotiations for the option agreement began in May, and at the OUC’s request.

Despite the concurrence of the negotiations for the Turkey Point option and the power purchase agreements, which are key to the sale of Vero Electric to FPL, both the OUC and FPL continue to maintain there is no connection between the two.

Last week, Inside Vero made a public records request of the OUC, asking for all documents relating to the OUC’s request for and negotiation of its option agreement for power from the proposed Turkey Point 6 & 7 units, including letters, emails, meeting notes and memos from or to any OUC employees or other persons acting on OUC’s behalf, as they would relate to the OUC’s request for and negotiation of its option to participate in FPL’s Turkey Point 6 & 7 plant.

In a May 22 email, Trudell explained that the OUC is “pulling the information together” and will be sending an estimate for the copying charges and a timeline for completion.

Whether the Turkey Point option agreement FPL gave the OUC for all of $10 (ten dollars) becomes relevant in the Department of Justice’s consideration of FPL’s proposed acquisition of Vero Electric only time will tell.

 

FPL and OUC sign “nuclear option” agreement

MARK SCHUMANN

Published February 3, 2013

About the same time Florida Power & Light, the Orlando Utilities Commission and the City of Vero Beach announced the successful negotiation of power purchase agreements that paved the way for FPL to acquire Vero Electric, FPL slipped into the last sentence of a semi-annual PSC filing notice that it had also reached an agreement giving the OUC an option to buy into two new 1,100 megawatt nuclear reactors FPL proposes to build at its Turkey Point plant.

From the time FPL first announced plans to build Turkey Point units 6 and 7, the company has insisted there would be no opportunities for municipal utilities and electric cooperatives to share joint ownership in the project.

Because nuclear power plants are built with technology developed by the federal government, investor owned utilities such as FPL have been required by regulators to at least explore shared ownership options with other interested utilities, such as municipal electric system and electric cooperatives.

As an example of such joint ownership, through its membership in the Florida Municipal Power Agency, Vero Electric owns a fractional interest in FPL’s Saint Lucie Two nuclear reactor.  The purchase of that fractional interest by the FMPA was only made possible through court action the agency took against FPL, which to that point had refused to let other utilities buy into its Saint Lucie nuclear project.

Similarly, Florida’s municipal utilities had to appeal to the Florida Public Service Commission several years ago to force FPL to at least hold discussions with them about joint ownership in its proposed new Turkey Point reactors.

For more than two years, FPL has been under order by the PSC to communicate with any interested municipal utilities about possible joint ownership in Turkey Point units Six and Seven.  Further, the PSC ordered FPL to provide a summary of these discussions twice a year.

To date, the essence of all these communications has been FPL’s insistence that it is simply too early to have specific discussions about what portion, if any, of the output capacity of Turkey Point units Six and Seven it will be willing and able to make available for joint ownership.

In its latest filing with the PSC on these joint ownership discussions, dated Oct. 1, 2012, FPL reported that a meeting was held in Orlando in early May with FPL and representatives from the FMPA, the OUC, the Jacksonville Electric Authority, the Seminole and Ocala Electric Cooperatives, Homestead Electric and Lakeland Electric.

In the last sentence of its Oct. 1, 2012 PSC filing, FPL reported, “Additional discussions were held with the OUC, and FPL and OUC have executed an option agreement for OUC’s potential participation in Turkey Point 6 & 7.”

If the option agreement executed between FPL and the OUC turns out to be a side deal, to the exclusion of other interested municipal utilities and cooperatives, some will surely wonder if the agreement has anything to do with the OUC’s willingness to take on Vero Electric’s FMPA entitlements in order to clear a path for the sale of Vero Electric to FPL.

If the option agreement between FPL and the OUC is in any way related to their power purchase agreement involving Vero Beach, questions will almost surely be raised about whether these agreements constitute an arms length transaction, as require by IRS guidelines.

Further, if the option agreement executed by the OUC and FPL for joint ownership in the proposed Turkey Point 6 and 7 nuclear units is in any way connected to FPL’s attempted purchase of Vero Electric, Federal regulators may see the offering of the option agreement as FPL’s way of flexing its muscle in order to expand its service area.