COMMENTARY

MARK SCHUMANN

In a front-page story published in the Press Journal this morning, columnist Russ Lemmon wrote of a “dispute” between Florida Power & Light and the Florida Municipal Power Agency.  Anyone reading the column who is not aware of the larger picture might assume what Lemmon wrote is completely accurate, but it is not.

Lemmon did not explain that FPL has negotiated unsuccessfully with both the Orlando Utilities Commission and the FMPA as it seeks to find a buyer for Vero Beach Stanton I and Stanton II power entitlements.  To suggest that the deal cannot go forward because the FMPA’s proposal was “much higher” than FPL anticipated, without telling the reader that OUC also wants more than FPL is willing or able to pay, is to serve up, at best, just half the truth.

What is holding up the power sale is not so much a “dispute” between the FMPA and FPL, but a “dispute” with economic reality  – and the reality is that neither the FMPA nor the OUC is willing to take on Vero Beach’s Stanton I and Stanton II power entitlements for up to three years at a price that works for FPL.

Lemmon also did not explain that the original power purchase agreements were shelved because attorneys for FPL and the City finally concluded, as FMPA representative had maintained all along, that the Internal Revenue Service would never approve the plan.

If the sale does not go through, a blame game will surely follow. I hope Lemmon’s column this morning is not an indication that he is planning on joining the FPL/Wilson-Heady-Mucher-Stump-Heran-Faherty public relations team as they try to pin fault on the FMPA.

The island weekly this week also tried to lay blame on the FMPA for the stalled negotiations.  “Sources (presumably FPL sources) close to the negotiations told Vero Beach 32963 that the terms being demanded by the Florida Municipal Power Agency are ‘ridiculous” and not only outside the bounds of what FPL is willing to pay, but also beyond what the Florida Public Service Commission might allow in terms of protecting FPL’s current customer base from overly negative financial impact,” reporter Lisa Zahner wrote.

Just as Lemmon did, Zahner failed to explain to her readers that FPL has also been unable to come to terms with the OUC on taking Vero Beach’s Stanton I and Stanton II power before Jan. 1, 2018.

Zahner and her editors also seem to be smarting because guest columns by FMPA CEO Nick Guarriello explaining the FMPA’s position ran in the Press Journal and in Inside Vero and not in the island weekly.

This deal isn’t necessarily dead though, because the sales contract allows for a closing as late as Dec. 31, 2016. If the closing takes place at the end of 2016, Vero Beach’s Stanton I and Stanton II power entitlements will have to be offloaded, not for 36 months, but for only 12 months. In an email response to a question I asked of John Igoe late last week, his partner Rick Miller wrote, “We understand there would be a pro rata reduction of this fixed payment if the delivery period is for less than three years, although we are not direct parties to the negotiation.”

If a pro rata reduction is ultimately not agreeable to the FMPA or the OUC, the deal is still not necessarily dead.  In exchange for $34 million in cash and other consideration, OUC has already agreed to assume Vero Beach’s position in the Stanton I and Stanton II projects beginning Jan. 1, 2018. With a contract extension allowing for a closing in early 2018, presumably there would be no need to work out a side agreement with the FMPA or the OUC. 

It is costing FPL relatively little to simply wait until late 2016 to close the deal. The OUC would make out better as well, because it will receive the same $20 million from Vero Beach for ending the wholesale power agreement early, though as a result of a delayed closing Vero Beach will be honoring that contract for an additional three years. (Negotiators for Vero Beach did not provide for an pro rata reduction if the closing was delayed.)

In a way, the City will also benefit from a delayed closing.  By late 2016, another $15 million in electric system debt will have been paid down, and the City will continue to benefit from the annual transfer from the electric system to the general fund.  On the other hand, the City will be paying approximately $3 million in additional interest payments through late 2016, and every retirement from the electric system between now and then will be an additional burden for the City.

The ratepayers are the ones who will really lose.  Bound by the sales contract with FPL, there is very little the City is free to do to significantly lower rates, such as renegotiating with the OUC, upgrading transmission capacity into the city and decommissioning the power plant.

One solution for concluding the sale and reducing rates for the customers of Vero Electric as quickly as possible might be for City leaders to agree to extend the contract closing date until early 2018 in exchange for FPL’S willingness to take steps now to help the Vero Electric reduce rates.  There seems to be broad agreement that Vero Electric’s rates would come down if the City were not operating the power plant.  In consideration for extending the closing date, perhaps FPL could be asked to accelerate construction of the transmission upgrades that would enable the City to decommission the power plant?

According to statements FPL spokeswoman Amy Brunjes made in a memo to City Manager Jim O’Connor this week, the company is considering options it hopes to propose to the city soon.  Let’s hope FPL’s proposals include options for helping the City to reduce rates sooner rather than later.