GUEST COMMENTARY

Editor’s Note: Nicholas P. Guarriello is the General Manager and CEO of the Florida Municipal Power Agency.

NICHOLAS GUARRIELLO 

Florida Municipal Power Agency (FMPA) is committed to working with Vero Beach, consistent with our contracts and the interests of our cities and bondholders. After hearing some reports on the status of negotiations between Florida Power & Light (FPL) and FMPA related to Vero Beach’s electric system, it is important for FMPA to comment to avoid incorrect expectations.

Contrary to some public comments, the possible vote by FMPA’s Executive Committee in February is not at all a decision about letting Vero Beach out of its FMPA contracts, nor any other conclusive step in this necessarily multi-step process. It is, instead, a decision whether and at what dollar amount FMPA would consider assuming the risk for Vero Beach’s power for up to three years from the Stanton and Stanton II coal plants since FMPA does not need the power until 2023 based on current projections, coal power is currently more expensive and there are regulatory risks for coal. This is only one of many issues that Vero Beach must resolve to satisfy Vero’s contractual obligations with FMPA and OUC in order for Vero to sell its electric system. As FPL’s spokesperson Amy Brunjes was recently quoted as saying, “It’s a very complex transaction.”

It became clear to Vero and FPL in spring 2013 that the IRS’s Private Use regulations might not permit OUC to sell Vero’s Stanton and Stanton II coal power to FPL for three years, as had been planned. To avoid IRS regulations, FPL made a proposal to FMPA on Aug. 20 that, among other things, would have FMPA take the Stanton power, replacing the signed contracts between OUC and FPL for the three-year sale of the Stanton and Stanton II coal power. However, FPL’s proposal to FMPA contained an important blank; it left unspecified the dollar amount that FPL would pay for FMPA to purchase the Stanton coal power from OUC. FPL requested that FMPA determine the dollar amount that FMPA’s member cities would need to consider the FPL proposal.

FMPA staff calculated the dollar amount, with assistance from an independent utility consultant, and this number was communicated to FPL on Dec. 6, 2013. FPL wanted to know the number before FMPA staff presented it to FMPA’s Executive Committee so that FPL could assess its feasibility. FPL understands that the dollar amount would be the recommendation of FMPA staff, but the decision whether to move forward and at what dollar amount rests solely with FMPA’s Executive Committee members. To date, FMPA is still waiting to hear back from FPL whether the dollar amount is acceptable.

If FPL rejects FMPA’s number, then no discussion by FMPA’s members is necessary, and FPL can pursue other options. Under this scenario, there would be no discussion or action by FMPA’s Executive Committee. FPL has other options, including amending its existing contracts with OUC.

If FPL accepts the number, then FMPA staff will ask its Executive Committee if they want to pursue FPL’s proposal, and the Executive Committee may direct FMPA staff to work with FPL, OUC and Vero to develop the many legal agreements that will be necessary to implement FPL’s proposal for the three-year sale.

At this point, since FPL has not responded prior to FMPA’s January meeting agenda package mailing, when FPL responds to FMPA, FMPA staff will communicate that response to the Executive Committee. Thereafter, it will be presented as an information item at the next available, regularly scheduled meeting, which would be no earlier than February. After hearing the proposal as information, if the Executive Committee is willing to consider taking action, the matter will be placed on the action agenda for the next regularly scheduled meeting one month later.

In addition, there are 20 FMPA member governing bodies that must give unanimous approval and consent to other FMPA contract changes in order to allow Vero to meet its contractual obligations with FMPA. If FPL and FMPA reach an agreement and when all the necessary contracts are developed, these contracts will have to be approved by many parties, including  FPL, Vero Beach, OUC, bond insurers, credit rating agencies, bond trustees and others, followed finally by FMPA’s Executive Committee and Board of Directors.

Whether or when FMPA’s members consider FPL’s proposal to assume the Stanton power for up to three years depends on FPL’s response to FMPA’s dollar amount. FMPA is waiting to hear from FPL. At this point, it is up to FPL to decide if the proposal to FMPA can move to the next step of a multi-step process.