“Shores leaders and FPL representatives have yet to effectively refute in detail the City’s estimates. Absent different and credible estimates, the only way to rationalize a $30 million price is to dismiss the City’s position that everyone must be ‘kept whole.'”
When representatives from Florida Power & Light, the Town of Indian River Shores and the City of Vero Beach met earlier this week to discuss a possible sale of Vero Electric’s 3500 Shores customers, FPL’s delegation presented an offer of $30 million, more than doubling their original $13 million proposal. Some, including and especially Shores officials, are hailing FPL’s offer as “generous.” FPL spokeswoman Sara Gatewood said a sale at $30 million would be “a win for all parties.”
Not everyone sees it that way. Officials for Vero Beach, including City Manager Jim O’Connor and special utility counsel Schef Wright, stress that the City’s priority, and the fiduciary responsibility of its elected officials, is to ensure a partitioning of Vero Electric does not result in higher rates for the remaining customers, or higher taxes for City residents. In their language, any sale must be “cost neutral” and “risk free.”
Importantly, is it Shores leaders and FPL officials who are seeking to carve off a portion of Vero Electric. Vero Beach leaders, though they have sought to sell the full electric system, are not proposing to partition the municipally owned utility, for doing so, they say, will have negative impacts, and will leave the City with significant financial risk. That the Shores and FPL are asking for the sale is an important distinction, for it puts the burden on them to pay a price that keeps Vero Beach’s taxpayers and electric customers “whole.”
To determine what price FPL and/or Shores residents would have to pay to keep from hurting the City’s remaining customers and tax payers, Vero Beach officials hired a team of five utility experts and rate consultants. This team evaluated the likely risks and financial impacts of carving up the system. In doing so, they concluded a sale of Vero Electric’s Shores customer base for less than $42.5 million, plus provisions to cover contingent liabilities, would have negative impacts for everyone but Shores residents. (For a detailed description of the City’s $42.5 million estimate see: Vero Beach, Shores, FPL representatives to discuss number for a ‘partial sale’ July 26.)
From the City’s perspective, the priority is not to arrive at a “generous” price, or a “fair” price, but rather a price at which the City’s taxpayers and electric customers will not be stuck paying higher rates. According to the experts, the so-called “partial sale” being proposed by the Shores and FPL will leave the City with a smaller, less efficient electric system; and, at $30 million, carving off the Vero Electric’s Shores customers base will leave the City holding debt obligations and financial risk assumed, at least in part, to serve Shores customers.
In a recent report addressing the Shores’ petition to alter service territories for FPL and Vero Electric, Florida Public Service Commission staff underscored the Commission’s long-standing policy that any changes in service territories, and any acquisitions such as the one now proposed by the Shores and FPL, must benefit all the affected customers. In the case of this proposed partial sale, at least in the opinion of five utility experts and rate consultants, if it is concluded at just $30 million, the deal will not pass the PSC’s test of fairness to all.
From the perspective of the professionals, what FPL’s public relations specialist characterized as a win-win, would, in fact, be a win-lose deal, with the taxpayer of Vero Beach and the remaining customers of Vero Electric left to essentially subsidize lower rates for Shores residents. Shores leaders and FPL representatives have yet to effectively refute in detail the City’s estimates. Absent different and credible estimates, the only way to rationalize a $30 million price is to dismiss the City’s position that everyone must be “kept whole.” This argument is contrary to PSC precedent. If City leaders fall for it, they may find themselves facing charges that they have breached their responsibilities to the taxpayers of Vero Beach.
At least two members of the Vero Beach City Council, Harry Howle and Pilar Turner, have tended to side with the Shores, often leveling sharp criticism at the City’s consultants. Yet, like Shores and FPL officials, they have not presented a coherent case for a lower sale price. Mayor Jay Kramer, Vice Mayor Randy Old and Councilman Richard Winger have all previously stood by the City’s estimates.
Shores leaders are meeting this morning to discuss FPL’s latest proposal, which includes a “surcharge” on Shores residents to help fund the sale. Vero Beach leaders are scheduled to meet next on August 16.