COMMENTARY

MILT THOMAS

There are many aspects of this issue that are important to the City of Vero Beach’s future, but to customers of Vero Electric, the only issue is what they pay each month for electricity. While the City continues to reduce electric rates, (down 8 percent since 2013, and 26 percent since 2009), people are still asking, “What happened to the sale of Vero Electric we were promised?” The following article is written to answer the question as simply and directly as possible without all the nuances and political intrigue.

Indian River County is currently served by two electric providers, Florida Power & Light (a publicly traded major corporation) and Vero Electric (a local, city-owned utility). Due to its size and financial resources, FPL offers electric rates that in recent years have been consistently lower than Vero Electric (or most other municipally-owned electric providers) rates. A fair analogy would be a major chain like Walmart offering lower prices than local merchants for the same products.

Many of Vero Electric’s customers live outside Vero Beach city limits, an arrangement agreed to many years ago when Vero Electric was the primary source for electricity in Indian River County. That agreement is due to expire next year. However, the state’s Public Service Commission has affirmed Vero Electric’s right and responsibility to continue serving its customers. The County Commission appealed the PSC’s ruling to the Florida Supreme Court, but lost.  

Back in 2009, When Vero Electric’s rate was $158.82 per 1000 kWh,  a local effort was undertaken to convince voters and ratepayers they should agree to sell Vero Electric to FPL. ‘Sell’ advocates Glenn Heran and Steve Feherty developed an analysis and presented it around town and in the media that showed the city would gain close to $180 million from the deal. This projected “profit” from the sale would, they said, more than make up for the revenue lost to the city by selling its biggest asset.

The following year, the City Council majority  of Craig Fletcher, Pilar Turner, and Tracy Carroll began serious negotiations with FPL.  In 2013 they signed a purchase and sale agreement with FPL and then held a voter referendum, though many details of the agreement had yet to be worked out. The local daily Press Journal also promoted the sale as well as the weekly 32963. Voters approved the sale, thinking it was a ‘done deal.’

But as the details took shape, the Heran-Feherty $180 million gain to Vero Beach gradually eroded to a $26 million loss that would have to be borne by all city and county Vero Electric ratepayers. Yet Vero Electric ratepayers were still in favor of the deal because it meant lower electric rates with FPL. That line of reasoning was reinforced by the Press Journal, in spite of the potentially negative impact on residents of Vero Beach, who would have to make up in tax increases, or in reduced municipal services, what they would lose in revenue and investment from Vero Electric. It should be noted that the president of the Press Journal parent company is married to an executive of FPL.

Despite voter approval of the referendum, the sale was not completed because of inherent flaws that were overlooked when the original deal was made. Those deficiencies in the deal negotiated with FPL at a cost of some $2 million in legal fees are not ones the city can correct or accept.  Rather, they have to do with contractual obligations the city has to the Florida Municipal Power Agency and its bondholders.  

The city is part of the Florida Municipal Power Agency (FMPA), which is owned by 31 local municipalities. The FMPA was formed by these municipalities to buy electricity at more favorable rates for its ratepayers. That involved making long term investments in power generating facilities. One flaw in the city council’s original deal to sell Vero Electric to FPL was that the selling price did not include the potential cost to the City of Vero Beach (and its taxpayers) for its share of future expenses that were agreed to when the FMPA was formed. This problem could be solved with more money paid by FPL, or by the customers of Vero Electric in the form of a surcharge on future FPL bills, or by FPL agreeing to assume those liabilities.

More important that the unaddressed contingent liabilities is the fact that the Orlando Utilities Commission, which had agreed to assume Vero Beach’s long-term position in three FMPA power projects, backed out of the deal when it was determined the deal would conflict with the OUC’s existing bond covenants.  Because FMPA power projects are funded with tax-exempt bonds, IRS rules prohibit FPL or any other investor owned utility from buying or assuming Vero Beach’s position. Since the OUC backed out of the deal, no other qualifying municipal utility has been willing to assume Vero Beach’s contracts to support the power projects, or to buy power from them.

Then in the past year, the Indian River County Commission voted to petition the Public Service Commission to approve leaving Vero Electric at the end of Vero’s agreement to serve county customers. That petition was denied by the PSC, and the PSC’s decision was upheld by the Florida Supreme Court.

The town council of Indian River Shores filed suit to break away from Vero Electric and allow FPL to serve them. That legal effort failed, though the Town has a petition pending with the PSC, with a decision expected next week.

The Indian River Shores Town Council in collaboration with FPL then made an offer to buy their share of the Vero Electric customer base. The County Commission, the Press Journal and the weekly 32963 all supported that effort. The Vero Beach City Council agreed to consider a partial sale and assembled a team of utility experts to determine the price at which Vero Electric customers and Vero Beach taxpayers would be shielded from future obligations. Their estimate of a selling price was $47 million.

FPL first offered $13 million, then $30 million, with $3 million to be paid by Shores residents. The Vero Beach City Council then countered with $47 million and was vilified in the Press Journal and 32963, which is owned by an Indian River Shores resident and partially supported financially by Indian River Shores townspeople. The counteroffer was rejected and not re-countered.

These failed efforts have cost Indian River County taxpayers over $300,000 and Indian River Shores taxpayers almost $1 million. Defending against these actions by our own county and sister community have also cost the customers of Vero Electric.

Meanwhile, the current Vero Beach City Council has reduced electric rates twice and agreed to a plan that would close the power plant and result in more savings. These positive steps have received little attention in the Press Journal or 32963.  At the same time, FPL has asked the PSC for a $1.3 billion (that’s with a B) rate increase. That request has received no attention in the Press Journal or 32963.  The future cost of Vero Electric vs. FPL rates could well intersect in the next few years.

Completing the sale of Vero Electric is still a hot button issue, claimed as a goal of many local and state house candidates. However, like The Emperor’s new clothes, there is no sale to complete – no executable contract, no deal to reimburse Vero Beach taxpayers for their long time profitable investment, no effort to seek a competitive bid – just a slogan, “sell Vero Electric.”