MARK SCHUMANN

With Councilwoman Pilar Turner dissenting, the Vero Beach City Council yesterday approved revisions to the City’s 2008 wholesale power agreement with the Orlando Utilities Commission. The new deal, which is expected to be finalized in April, will lower the City’s wholesale power costs, shorten the term of the agreement, and will allow for the decommission the power plant.

The Council’s 4-1 action follows unanimous approval of the proposed contract revisions by the Finance and Utilities Commissions.

In addition to cutting wholesale power costs, the revised contract with the OUC will shorten the remaining term of the agreement from 14 years to 9 years. Vero Beach receives two-thirds of its power from the OUC, with the rest coming from the Florida Municipal Power Agency.

The OUC contract was originally negotiated and signed in 2008 and went into effect in 2010.  When the deal was struck, natural gas prices were three to four times their current rates and demand for power in Florida was rising with a booming housing market. The deep recession that followed the collapse of the housing market, coupled with steep declines in natural gas prices, changed the Florida’s wholesale power market, leaving Vero Beach committed to buying power from the OUC at prices above the open market.

Though the original OUC agreement left Vero Beach with rates significantly higher than neighboring Florida Power and Light, the deal did cut power costs for the City’s 34,000 customers. In December 2009, a month before the agreement went into effect, Vero Beach’s rate for 1000 kilowatt hours of residential power was $158.82. The rate today is $123.93. Allowing for a 6 percent franchise fee, Vero Beach rate differential with FPL has dropped from 28 percent to 15 percent.

Still, City officials and utility attorney, Schef Wright, believe a renegotiated agreement with the OUC is an important step in further reducing power rates. They also expect to save several million dollars a year by decommissioning the power plant, a move that would not be possible without a new agreement with the OUC.  Currently, the City is required to keep the power plant in operation so it can be called on to meet peak demand. The plant sits idle 95 percent of the time and operates at an annual loss of some $4 million.

Wright is expected to have an new agreement ready for final approval by the Council in April.