COMMENTARY
MARK SCHUMANN
Under the weight of Vero Beach’s contractual obligations, the walls have fallen in the house of cards that was Florida Power & Light’s attempt to acquire Vero Electric.
The central pillar supporting the sale crumbled when Orlando Utilities Commission leaders concluded the deal would put in jeopardy their existing bond covenants. Without the OUC to assume Vero Beach’s position in three Florida Municipal Power Agency projects , there is no deal, because there is no other buyer willing and able to assume Vero Beach’s place in the FMPA power projects.
Without the OUC, the deal is dead. Yet, many pro-sale advocates continue to insist the sale could be salvaged, if only the Vero Beach City Council were willing to lock horns with the FMPA it what would surely be a lengthy, costly, and many believe, dubious legal battle.
Those unwilling under any circumstances to accept “no” for an answer accuse the current city council of not doing enough to force the FMPA to set aside the organization’s contractual obligations to its members and bondholders.
Though one utility activist, obviously campaigning, goes before the television cameras week after week to accuse the current council of allowing the deal to fall apart, the facts simply do not support his claim. In truth, the deal unraveled, not because of action or inaction on the part of the city council, but because, in the exercise of due diligence long delayed, it became undeniably clear Vero Beach’s legal obligations to its fellow FMPA members and bond holders simply will not allow for the sale to go forward as structured and funded.
Even if FPL were willing to put tens of millions more into the deal, and even if Vero Beach voters were inclined to approve an amended sales contract obligating Vero Electric’s customers to pay $26 million or more in surcharges, those moves would not be enough to save the deal. Still unresolved would be the need to find a buyer willing and able to take Vero Beach’s position in the FMPA’s St. Lucie 2, and Stanton I and II power projects. The term “buyer” is used loosely here, because Vero Beach was to pay the OUC more than $40 million dollars to assume the FMPA contracts.
Publicaly, FPL spokespersons continue to insist a willing buyer and a willing seller are ready to close the deal. That assertion is only fractionally true. Yes, Vero Beach voters have agreed to sell their electric utility to FPL under the terms of the sales contract signed in the spring of 2013, and FPL is clearly eager to take over the system. The catch, though, is that FPL, an investor-owned utility, cannot assume Vero Beach’s position in the FMPA, a consortium of municipally owned utilities. Federal tax law simply will not allow it.
A little more than two years ago, before the OUC agreed to play dealmaker, Vero Beach City Manager Jim O’Connor gave the sale little chance. Then came the breakthrough, the game changer. In OUC, Vero Beach and FPL thought they had the perfect partner who could help structure a deal to meet IRS regulations, while also satisfying Vero Beach’s contract obligations to the FMPA.
Vero Beach and FPL representatives experienced the roller-coaster ride of pleasant surprise followed by disappointment when, out of the blue, OUC officials announced they could not be part of the deal.
“Find another buyer,” pro-sale advocates say. Or, if necessary, “take the FMPA to court and shove Vero Beach’s contracts down their throats.”
The first approach sounds reasonable, except there are no other qualified buyers, at least none willing take on Vero Beach FMPA obligations. Requests for bids and proposals have been sent far and wide, with no result. The only utilities legally able to “buy” Vero Beach FMPA power contracts are simply not interested. The second strategy, though it may temporarily relieve frustrations, is doomed to fail.
Despite FPL’s claims to the contrary, there is no willing buyer for Vero Beach’s FMPA contracts, and so the sale is dead.
In the face of this daunting reality, why do some city council candidates and political activists continue to push for the sale? Are they misleading the public in search of votes? Possibly. Are they resorting to wishful thinking? Definitely.
There is an axiom that at least partially explains why so many people refuse to accept the time has come to lay to rest the corpse of a contract that once held the promise of lower electric rates. “A mind changed against its will is of the same opinion still.”
Beyond the OUC’s withdrawal, there are, to be sure, other insurmountable obstacles to the sale, including the need for yet another referendum, the prohibitive cost to Vero Beach to withdraw from the FMPA’s All Requirement Project, FPL’s refusal to accept Vero Beach’s contingent liabilities, and FPL’s insistence Vero Beach rate payers assume a portion of unanticipated costs, costs which the company is contractually obligated to assume.
Further, pro-sale advocates are not willing to accept that they are asking the FMPA to make concessions that would surely lead to a bondholder revolt, and would land FMPA leadership in court. Believing they can force the FMPA to make contract concessions, the Indian River County Commission and the Indian River Shores Town Council have launched what appears to be a coordinated attack on the city. Within a week of each other, the County Commission filed a case with the PSC, while the Shores Town Council went to court.
The Shores and the County are basing their cases on the claim that the PSC’s authority over service territory assignments is subordinate to a municipality’s authority to enter into franchise agreements. Some 50 Florida utilities, INCLUDING FPL, reject this claim.
Not wanting to get a “no” for an answer in advance of the Nov. 4 city council election, the County Commission maneuvered to delay the PSC ruling until late Nov. When the PSC finally responds to the County’s request for clarification, the answer almost surely won’t be what the Commission is hoping for. If the PSC affirms its authority over service territories, down will come the pillar of the Shores lawsuit.
At that point, all that will be left for Vero Beach, County and Shores officials to do will be to hold a proper funeral for the deal, bury their hatchets, and begin working together to lower rates and to form a utility authority that will give all 34,000 customers of Vero Electric an equal voice in the running of their utility.
Indian River Guardian 
The first step in getting lower electrical costs is by having an effective representative in the Florida legislature who can work for the removal of the nuclear cost recovery fee. This is essentially a means of siphoning off some of the money paid for electricity into a separate bank acount to be used in the event that there is a proposal to build another nuclear power plant in Florida. It is highly improbable that this will occur since there has been no application made to the U. S. Nuclear Regulatory Commission for a new nuclear plant since the Three Mile Accident.
The savings per household would not be high. However, they would be enough to pay for the luxiry of a dinner at one of our local high end restaurants each month.
Pat, where is this fee you speak of? Im on fpl and I don’t see it, is it some hidden charge?
In a Public Radio interview (WLRN/Miami) in Feb. 2013, Phil Latzman asked FPL President Eric Silagy about the Nuclear Cost Recovery Fee. Mr. Silagy was quoted in the interview as saying, “The advance cost recovery legislation has worked beautifully…” Approx. $320 million had been collected so that 525 megawatts of additional power was added to Turkey Point – South Miami-Dade. The interview did not mention, near as I could see, how much was added to the appox. 4.6 million customers’ monthly bills. However, I may have overlooked that info.
Those who say the sale is still able to be completed are wrong. They are using the sale issue to get elected to the council. What they do not want to admit, the current council majority of Winger, Kramer and Graves have lowered electric rates, protected public lands, and brought a civility to council meetings. People like Charlie Wilson and Brian Heady , perpetual candidates ,hog podium time and often harangue council members . Wilson’s friend Glenn Heran has tried this tactic on occasion, but rebuffed quite soundly. The worst offender is Charlie Wilson who spews misinformation by the” truck load” in quest of his desire to be mayor. His only hope of getting elected is to try and convince voters that the sale to FPL is possible, when this is impossible since entities like OUC and FMPA will not be part of any deal ,especially when the Vero Representative is Pilar Turner.