COMMENTARY

MARK SCHUMANN

When representatives from the Town of Indian River Shores and the City of Vero Beach adjourned their mediation session today, the two neighboring municipal governments were left at impasse. All indications are Shores special counsel, Bruce May, and his clients are ready, perhaps even eager, to take their case to court.

Shores officials argue they have the right to force Vero Beach to abandon its electric customers and to remove its utility infrastructure from within the town, when the franchise agreement between the Shores and Vero Beach expires in 2016.

For their part, Vero Beach officials, at least the current city council, contend the city’s service territory assignment from the Florida Public Service Commission stands above any franchise agreement.  Based on the assurance of ongoing service rights and responsibilities, they say the city has made long-term commitments for power generating capacity and for multi-decade wholesale power contracts.

What direction City Manager Jim O’Connor and Vero Beach special counsel Schef Wright take after Nov. 4 will almost surely depend on the outcome of the city council election. Harry Howle III, Pilar Turner and Charlie Wilson all say they agree with the Shores. Vice-Mayor Jay Kramer, along with candidates Randy Old and Jack Shupe, seem inclined to support O’Connor and Wright in standing the City’s ground.  In every way that matters, candidate Brian Heady is a wild card.

Beyond wanting Vero Beach to remove its utility poles, power lines and transformers from within their town, Shores officials contend Vero Beach owes its Shores customers a refund for “over charges” and “unreasonable rates.”

City officials counter that Vero Electric’s rates, which vary with the cost of power, have never included more than a six percent return, while the PSC grants Florida Power & Light and other investor-owned utilities rates of return of 11 percent or more.

Currently, Vero Electric’s rates are below the statewide average for investor owned utilities.  That is not enough to satisfy Shores officials, who insist they have a right to the lowest rates in the state — those currently charged by FPL.

The third point in the Shores’ lawsuit is a demand Vero Beach form an independent utility authority to oversee Vero Electric.  The objective of this authority would be to improve oversight and to give all 34,000 customers equal representation in the running of the utility and in the setting of rates. Ironically, the very utiliy activists who applaud the Shores for suing Vero Beach also oppose forming a utility authority.  It would, they say, create another level of government.

The current city council majority of Mayor Richard Winger, Vice-Mayor Jay Kramer and Councilwoman Amelia Graves generally support the concept of a utility authority.  They have asked O’Connor to explore options. Candidates Randy Old and Jack Shupe have said they also support forming a utility authority, while Howle and Wilson join Turner in her opposition to an authority.

As a backdrop to the Shores’ lawsuit, the Indian River County Commission filed a complaint with the PSC. Like the Shores, the County contends that when its franchise agreement with Vero Beach expires, — in 2017 — the County has the right to insist Vero Electric surrender, without compensation, the customers it currently serves in the unincorporated areas of the county.

Like the Shores’ lawsuit, the County’s argument rests on the assertion the PSC’s authority over service territory assignments is subordinate to a municipality’s right to provide for utility service within its jurisdiction.  More than 50 Florida electric utilities, including FPL, reject the County’s argument.

The PSC was scheduled to respond in early October to the County’s request for a declaratory ruling on the question. Apparently fearing a negative ruling could influence the outcome of the Vero Beach city council election, the County maneuvered to delay the PSC’s ruling. The PSC’s decision is now expected by late November.

If Howle, Turner and Wilson should sweep the Nov. 4 election, they can be expected to capitulate to the Shore and the County.   If they turn over 60 percent of Vero Electric’s customer base without fair compensation, the consequences could be devastating to Vero Beach.

Before they can hand Vero Electric’s out-of-city customers over to the Shores, to the County, or possibly to FPL, Howle, Turner and Wilson would likely find themselves and the City in court with the Florida Municipal Power Agency, and possibly also with the Orlando Utilities Authority.

Under its contracts with the FMPA, which are also tied to bond covenants, Vero Beach is not free to sell a substantial portion of its utility.  According to Wright, FMPA officials will probably view Vero Beach’s shedding of some 60 percent of its customer base as a material breach of contract.

Just as the Shores Town Council seems eager to fire the first shot in a legal fight with Vero Beach, Howle, Turner and Wilson sound as keen for battle with the FMPA as the Kaiser Wilhelm’s generals were to lock and load the “Guns of August.”

It is more than a little ironic that exactly 100 years after the great powers of Europe blundered into a long, bloody and expensive conflict, Vero Beach, Indian River Shores and Indian River County are now on the verge of firing the first shots in what some fear will be a multi-year, multi-million dollar legal battle that could make its way to the Florida Supreme Court.

The only ultimate winner, if there is one, will be FPL, whose officials are managing to at least create the impression they are standing on the sidelines minding their own business.  Some people in the know suspect otherwise.