GUEST COMMENTARY

Editor’s Note: Bill Conrad is Chairman of FMPA’s Board of Directors and the Mayor for the City of Newberry, Fla. Howard McKinnon is Chairman of FMPA’s Executive Committee and Town Manager for the Town of Havana, Fla.

BILL CONRAD AND HOWARD McKINNON

In the late 1970s, approximately two dozen Florida municipal electric utilities banded together to collectively purchase power at more competitive rates in order to benefit their communities. Born out of cooperation and mutual advantage, the Florida Municipal Power Agency (FMPA) has provided affordable, reliable power to member-owners and their customers for 37 years. Today, the power FMPA supplies helps provide electric service to more than 350,000 homes and businesses across Florida. Over the years, the agency has reduced municipal power costs by hundreds of millions of dollars.

While FMPA has quietly and successfully gone about its mission of providing members with competitively priced, dependable power for decades, the agency has recently received attention following the release of a preliminary audit report conducted by the Florida Auditor General. Like any audit, the preliminary audit report highlighted areas where the agency could improve.

As a steward of customer dollars, we take these recommendations and the opportunity to improve very seriously. Even though this is a preliminary, and not final, audit report, our board has already taken immediate action on several of the audit comments, including the discontinuation of certain expenses, such as Orlando Magic tickets, an indoor plant service, Christmas tree rental and an annual conference dinner for members in Washington, D.C.

On some of the more complex topics, FMPA’s Executive Committee has decided to retain the services of a management consulting firm to work with the Committee to address these audit recommendations.

Additionally, the agency had previously enhanced some of its policies before this audit was initiated. One example is the dramatic adjustment we had made to our fuel hedging policy. Hedging essentially enables an organization to lock in prices for a commodity in order to keep prices stable over a period of time. As natural gas prices were rapidly rising in the first half of 2008, the agency made the decision to stabilize prices by hedging. When our country went into a recession in September 2008, fuel prices suddenly dropped, and FMPA found itself in an unexpected situation that took time to work its way out of. Many other businesses that rely on commodities subject to price fluctuation, particularly some of the nation’s largest airlines, found themselves in a similar situation.

Today, natural gas hedging of the type discussed in the Auditor General’s report is no longer our practice and, more importantly, no longer impacting our electricity rates. We acknowledge that FMPA went through a tough period in 2008 through 2010, but that period is behind us and our rates are competitive again. Overall, our power costs have decreased more than 20 percent from the peak in 2009, and today, rates are competitive with the average wholesale rates of Florida’s investor-owned utilities.

FMPA thanks the Auditor General’s staff for its thorough and professional review. For six months, their team of auditors worked full time, reviewing billions of dollars of expenses on complex topics. It truly was a valuable process for FMPA.

We are proud of FMPA’s long history of helping hometown electric utilities provide the local, personal and affordable service their communities want and expect. And, we know our members expect the very best from us. We have already taken steps to improve based on the preliminary audit report, and we will address recommendations in the Auditor General’s final report once that is issued. Going forward, we will put all our energy into positive improvements that will better serve both our members and their customers. It is our top priority.