COMMENTARY

“Unlike Donald Trump, who has four times bankrupted his companies to avoid paying creditors, Vero Beach has no such option. As a member of these FMPA power projects, Vero Beach is a party to bond covenants that protect investors from being ‘Trumped.’ Anyone who seriously believes passage of HB 579 will in any way aid in the sale of Vero Electric to FPL is asking the wrong questions and settling for the wrong answers.”

MARK SCHUMANN

Though unwilling to report on Florida Power & Light’s proposed $1.325 billion rate increase, the Press Journal this weekend managed to offer its readers more than a little misinformation about the issues underlying State Rep. Debbie Mayfield’s effort to “reign in” the Florida Municipal Power Agency.

Reading reporter Isadora Rangel’s story on the status of Mayfield’s proposed legislation made me wonder if Rangel is being coached by Press Journal columnist Larry Reisman. Rangel wrote, “A House committee unanimously approved her (Mayfield’s) bill to reign in the Florida Municipal Power Agency.” What does the reporter/pundit mean by her use of the phrase “reign in?”

Collectively, municipal utilities served by the FMPA now charge an average cost per month for 1000 kWh of $114.63, compared to an average cost of $129.69 for the state investor owned utilities, including Duke Energy and Florida Power & Light.

FPL, not the state’s municipal utilities, is proposing a $1.325 billion rate increase, coupled with a request to the Florida Public Service Commission to step up FPL’s  allowable return on investment from 11 percent to 11.5 percent.  Even at an 11 percent return on investment, FPL’s profits were up in 2015. Last week, FPL reported a fourth quarter net income of $365 million, up from $286 during the same period in 2014. For the year, FPL reported a net income of $1.65 billion, compared to $1.52 billion in 2014.  FPL’s 9 percent increase in profits in 2015 isn’t keeping the utility giant from asking the PSC to approve still higher profits in the years ahead.

Florida’s municipal utilities are charging rates lower than investor owned utilities. Further, unlike FPL, Florida’s municipal utilities are not pushing for obscene rate increases, and they are not compensating their top executives $15 million a year.  So, who needs reigning in?

Without acknowledging that the FMPA is audited annually and that the report is public information, Rangel wrote, “HB 579 requires the FMPA, a cooperative of municipal utilities, to disclose its financial information to its 31 members.”

Fundamentally, though, Rangel missed the larger point, when she reported that determining the “fair market value” of the FMPA’s generating assets is “crucial” information for Vero Beach to have as it seeks to exit the FMPA. Determining a supposed fair market value of Vero Beach’s investments in three FMPA power projects is simply the wrong question to be asking. It’s like asking what your home is worth without also considering the balance of your mortgage.

Though the FMPA’s All Requirements Project has extensive investments in natural gas generation, Vero Beach bowed out of that FMPA project, choosing instead to sign an 20-year contract with the Orlando Utilities Commission for largely coal generated power.  Though that agreement has been renegotiated to the benefit of Vero Beach, the City is still paying more for OUC power than it would be paying if it had remained a part of the FMPA’s ARP project.

More to the point, though, Vero Beach is heavily invested in three FMPA power projects, two of them coal fired. Historically low prices for natural gas, and increasingly stringent regulation on coal generation, have left Vero Beach and its fellow investors underwater.  In other words, Vero Beach owes more on its share of the FMPA’s Stanton I and II coal plants than any qualified buyer would be willing to pay.

Unlike Donald Trump, who has four times bankrupted his companies to avoid paying creditors, Vero Beach has no such option. As a member of these FMPA power projects, Vero Beach is a party to bond covenants that protect investors from being “Trumped.” Anyone who seriously believes passage of HB 579 will in any way aid in the sale of Vero Electric to FPL is asking the wrong questions and settling for the wrong answers.