“There is a solution to the sale of Vero Electric and it should not shred the fabric of our community as it is resolved.”

COMMENTARY

MARK SCHUMANN

Based on recent statements by an FPL representative, negotiations to resolve the remaining issues holding up the sale of Vero Electric are essentially stalled. The continued absence of a willing partner to accept Vero Beach’s Stanton I and Stanton II power entitlements through Jan. 1, 2018 confirms the beliefs of those who have long-insisted the City’s contracts with Florida Municipal Power Agency would be the highest hurdle to clear in selling Vero Electric.

Both the FMPA and the Orlando Utilities Commission have expressed a tepid willingness to take on the power in order to bridge the gap to Jan. 1, 2018,  the point at which the OUC has committed to assume Vero Beach’s position in the FMPA power projects. Unfortunately, neither the FMPA nor the OUC is willing or able to take the power before 2018 at a price that works for FPL.

Advocates of the sale are understandably disappointed. From opponents, who will now insist the sales contracts and power purchase agreements cannot be executed and are thus null and void, comes the refrain, “We told you so.”

They, of course, have a point; and they are right to remind everyone that when the concept of selling the electric system was first presented to the public, trusted utility activists presented financial models showing the City would net $150 million on the sale.  The Heran-Faherty models failed to account for the $20 million the City will spend to terminate a wholesale power agreement with the OUC, or the $34 million to be paid the OUC for assuming Vero Beach’s position in three FMPA power projects – St. Lucie II, Stanton I and Stanton II.

In truth, the $34 million payment to the OUC is compensation only for assuming the City’s position in the two coal-fired generators east of Orlando.  As with $10 million worth of gas transmission rights to be assigned to the OUC, the St. Lucie II nuclear entitlement actually has a positive value.

Since FPL is offering only $111.5 million in cash, the City will likely net no more than $3 million, as it hands over an asset valued at $180 million.

This has never seemed like a great deal to me.  Beyond the specifics of the transaction, though, my larger concerns have been about the intentions of limited-government extremists who seem set on using the sale as an excuse to force the City to drastically cut services. For these reasons, I and many with whom I have spoken are ambivalent about the sale.

To be sure, there are ways the City could reduce rates, such as increasing transmission capacity into the city in order to then decommission the power plant. Taking the power plant offline and returning to the practice of financing capital improvements rather than paying for them out of cash could bring rates down to within 10 percent of FPL. But for how long? In the increasingly complex and competitive power industry, Vero Electric may not be able to remain within range of FPL over the long run.

Twice now the majority of Vero Beach voters have registered their strong desire to sell the electric in order to get lower rates. In addition to wanting lower electric bills, I suspect most voters who support the sale also believe, rightly or wrongly, that the City should get out of the power business. I wouldn’t necessarily disagree with them, except for the Turner-Solari-Heran-Taxpayers-Association-Tea Party extremists who will next push for the sale of the City’s profitable and well-run water and sewer system. Their ultimate goal? Unified local government – no City of Vero Beach.  (Some involved in north county government and politics are now wondering if advocates of unified local government have also set their sights on the City of Sebastian.)

The pressing questions now is how to respect the will of voters regarding the sale of the electric system, while at the same time doing what can be done to lower rates between now and the time FPL can take on the system at a price that works?

According the FPL spokeswoman Amy Brunjes, the company is developing options. If one of those options is a surcharge on the 34,000 customers of Vero Electric, the answer should be an emphatic “No!”

However, if the sale cannot go forward because the cost of offloading Vero Beach’s Stanton I and Stanton II power entitlements through Jan. 1, 2018 is too high, perhaps it is worth considering a one-year extension in the latest possible closing date. The existing sales agreement provides for a closing as late as December 31, 2016. In exchange for agreeing to what would essentially be a one-year delay, it would seem reasonable to expect FPL to support the City in making changes that would lead to lower rates sooner rather than later. After all, Jan. 2018 is a long way away, given the current rate differential between Vero Electric and FPL of $20 million plus.

For proponents of the sale, a delayed closing would be better than no closing at all. More importantly, for the tens of thousands of Vero Electric customers who simply want lower rates, moving now to save some $4.2 million a year by decommissioning the power plant might make a lot of sense.

Anyone genuinely concerned about the $20 million plus rate differential between Vero Electric and FPL should share a sense of urgency in finding ways to reduce the City’s rates. It does not serve the public to keep rates artificially high simply to bolster support for the sale.

The current Council was elected to see the sale through, if at all possible, and in a way that is fair to all stakeholders – the City and its residents and taxpayers, the 22,000 out-of-city customers, and yes, even the Florida Municipal Power Agency. Finding a means of holding the deal together, while lowering rates sooner rather than later, is the responsibility of the current City Council. Passing the buck to next year’s Council will only serve to put FPL in the position of having to work next fall to elect candidates who will agree to further concessions. Those candidates will have FPL’s unqualified support, regardless of what other extremist libertarian agenda they may harbor.

To be sure, there are other, though less challenging issues to be resolved before the sale can go forward, including providing for the City’s contingent liabilities. After literally years of negotiations, it would seem the time has come to either bring this deal together, or to move on.  The public has grown weary of hearing FPL representatives report month after month, year after year that they “remain confident of finding a path forward.”  What the 34,000 customers want and need are not promises, but lower rates.

I do not assume to fully understand the complexities of the sale. For reasons not apparent to me, postponing the closing to January 2018 may be an exceedingly bad idea. What I do strongly believe is that, given the clearly expressed will of voters, it is important to find a way to move the electric sale forward without surrendering the keys to the city.

As an articulate friend, Lux et Veritas, recently wrote, “Fulminations of rancor and furtive machinations are not productive. There is a solution to the sale of Vero Electric and it should not shred the fabric of our community as it is resolved.”