COMMENTARY
“Whatever solutions are pursued going forward, the concerns of Vero Electric’s 22,000 out-of-city customers cannot be ignored.”
Current Residential Rates Per 1200 KWH*
Average for Florida’s 33 Municipal Utilities: $144.92
Average for Florida’s 6 Investor-Owned Utilities: $145.37+
Average for Florida’s 39 Utilities: $144.98
Vero Electric: $158.89
*Florida Municipal Electric Association February 2014 Bill Comparison
+Does NOT include 6 percent franchise fee
MARK SCHUMANN
This week, Vero Beach 32963 reporter, Lisa Zahner, wrote that Florida Municipal Power Agency officials only recently “admitted” the contracts to which Vero Beach is a party “do not contemplate that a member city would ever want to sell its utility.”
In truth, as early as 2007, FMPA officials offered a blueprint for a sale of Vero Beach’s FMPA power project entitlement share. This model, including a checklist of action items, followed the example of Homestead’s sale to Kissimmee.
At least since 2007, then, it has been clear any sale of Vero Electric to a utility outside the FMPA system would require contract waivers; and those waivers can only be made with the unanimous approval of bond trustees, the FMPA board and the FMPA’s member cities.
The power sale is now teetering on the edge of an uncrossable gulf, because City leaders like Tracy Carroll, Craig Fletcher and Pilar Turner, along with the editors of the island weekly and the Scripps editorial board, pushed for the sale of Vero Electric to Florida Power & Light as if the city’s contracts do not say what they say and mean what they mean.
The City has now spent several years and more than $1.5 million on $500-hour attorneys who have accomplished little more than chasing their own tails. For all of that, the effort to sell Vero Electric in a way that does not comply with the City’s FMPA contracts is finally smacking up against reality.
Before ever seeking legal advice on if and how a sale of Vero Electric to a non-FMPA member could be achieved, the City Council made it the official policy of the City to sell Vero Electric to FPL. They might as well have made it the official policy of the City to defy the law gravity.
If Zahner wants to write about what she believes is the City’s “historically puzzling negotiating style,” she might explain to her readers how the Carroll-Fletcher-Heady-Turner-Wilson team brought FPL to the table without first making a serious effort to seek other qualified, competitive bids.
It would be inaccurate to suggest the discussions between the City and FPL have taken place around a “negotiating table.” From the moment Fletcher declared FPL “a part of the family,” and from the day the Council let FPL officials know the electric system was essentially theirs for the taking, there really haven’t been what one could call arms-length negotiations.
The transactional attorneys have seemingly been so compliant with FPL’s wishes that it would not be unreasonable to ask FPL to pay at least some their $500-hour charges. In fact, the way the transactional attorneys seem to have taken guidance, directly or indirectly, from FPL may be why FMPA officials have grown leery of dealing with them.
It would be helpful to be clear about at least one point: The contracts at issue, the ones containing provisions that will have to be waived if the sale is to move forward, are not agreements to which FPL is a party. To put it more bluntly, Vero Beach’s contract issues with the FMPA are really none of FPL’s business.
Further, these issues should have been resolved before the City began serious discussions with FPL. Instead, the City went to FPL looking, not only for a buyer, but for guidance on how to resolve its obligations to the FMPA. Together, the transactional attorneys and FPL have over the past three years charted a circuitous and hugely expensive path to nowhere.
It now seems increasingly likely the wheels are about to come off this deal. Some, including utility activist Glenn Heran, the Indian River County Commission and the Indian River Shores Town Council are making noises about possible litigation. Anyone concerned not to see more time and money wasted defying the laws of gravity should be deeply skeptical of any talk of taking the FMPA to court.
If and when someone throws in the towel, City leaders seem prepared to take important steps to lower rates significantly.
In the meantime
Currently, the City transfers six percent of its electric utility revenue to the general fund to help pay for municipal services. Without the utility transfer, these services would have to be cut or paid for through increased taxes.
City leaders refer to the utility transfer as a “return on investment.” However, given that the City sets its electric rates to ensure this return, can this really be considered a profit, or is it more accurately described as a tax? Whatever you call it, the fact remains that regardless of how uncompetitive Vero Electric may be, the City is able to “earn” an extra six percent for the general fund.
Unless and until the City can lower rates to within the average of all of Florida electric utilities – public and private – perhaps the fair thing to do would be to stop asking out-of-city customers to help pay for municipal services.The City may well have a legal basis for setting its rates high enough to ensure a “return on investment,” but outside the public and private utility world, out in the rough and tumble of the competitive free market, returns on investment are not guaranteed.
Whatever solutions are pursued going forward, the concerns of Vero Electric’s 22,000 out-of-city customers cannot be ignored.
Indian River Guardian 
Point taken. But what about the many services and amenities that us city tax payers give to out of city users. Does this mean that like many Florida cities out of town boat launchers would pay a $15.00 or so launching fee? Does this mean that out of city users of South Beach parking have to pay a fee just like at thousands of cities around the country charge? Does this mean out of city users should pay to park to go to Riverside park museums and theaters as they would going to most types of these places in most cities? Does this means that out of city user who use of the cabana in Humiston, JC parks etc will have to pay a fee? One of the sheer beauties of The City of Vero Beach is that there are very, very few user fees for amenities for out of city users.
Thank you Mark. Your suggestion about the underwriting that has been done for decades by the out-of-city customers should finally be addressed. We have been held hostage for far too long. It is not just the higher than necessary electrical costs that are of concern. There is also the issue of the re-sale of these properties because many real estate agents are being asked questions by potential customers about the differences in utility costs. Also, as identified in a Letter to the Editor in today’s publication of the Stuart-based newspaper the frequency of electrical service outage puts even more of a burden on customers. The author of the Letter to the Edtior identfied just the latest example of a long power outage. I have at this point lost track of the number of times that electrical service was unable available for multiple hours for no apparent reason.
Essentially, John, you are asserting that the six percent the City adds to its electric rates in order to come up with $5.5 million to transfer to the general fund is a tax on out-of-city customers. If the six percent is tacked on to rates that are not competitive, then this is, indeed, a tax.
On the other hand, if the City can raise this money while charging rates that are competitive — not specifically with FPL, but with Florid’a electric utilities on average — that would seem reasonable. If the City feels free to “tax” out-of-city customers six percent regardless of how uncompetitive its electric rates may be, then where is the compelling incentive to operate the system more efficiently?
The County Commission and the Town of Indian River Shores Town Council awarded the City a franchise to serve, not a franchise to tax. Even from the Public Service Commission’s perspective, the area outside the city limits served by Vero Electric is considered a service territory, not a taxing district.
What you are talking about has nothing to do with the Franchise Fee amount that the County gratefully receives from County users of City Electric. Right? I’d prefer the City increased our property tax and lowered the electric rates. I can turn off the lights, set the AC up a degree or two and shower quickly. I have no control over property tax.
Right, Cathy. I was not referring to the franchise fee collected by the City on behalf of the County, but to the franchise territory awarded to the City by the County. My point was that the City has a franchise to serve, not a franchise to tax.
The reasons tax collectors are mentioned in the New Testament writing as sinners is because the First Century Roman occupiers of Israel essentially “sold” the rights to collect taxes. Whatever these “franchisees” could collect over and above an agreed upon amount was their to keep. Thus, tax collectors were considered by the Jewish people as traitors, and understandably so. Jesus reached out to all of them. About Jesus, the Pharisees complained, “He eats with tax collectors and sinners.”