FMPA offers possible path for sale of Vero Electric

NEWS ANALYSIS

MARK SCHUMANN

A solution may be on the horizon to overcoming impediments that have so far blocked the sale of Vero Electric. To date, the absence of a qualified utility willing and able to assume Vero Beach’s long-term commitments to three Florida Municipal Power Agency projects has stood in the way of the deal. However, at a meeting of the FMPA board of directors in Orlando today, FMPA General Manager and CEO, Jacob Williams, outlined steps the agency is willing to take to help facilitate the sale of Vero Electric to Florida Power and Light.

Williams indicated the FMPA’s All Requirements Project, made up of 13 municipally owned utilities, could assume Vero Beach’s position in the Stanton I and II coal-fired power plants in Orlando, as well as Vero Beach’s share of the FMPA’s fractional ownership in the Saint Lucie nuclear plant. Because the average cost of Vero Beach’s power from these three projects is more than twice the current short-term price for wholesale electricity, Vero Beach will have to pay the FMPA’s ARP to “buy” the City’s position in the power projects. “Vero Beach will have to pay other municipal utilities to take its shares,” Williams explained to the FMPA board.

The original deal for the sale of Vero Electric, which fell apart when the Orlando Utilities Commission backed out, called for the FMPA to assume Vero Beach’s power shares for three years for $52 million. For an additional $50 million, the OUC had indicated it would, after the first three years, permanently assume Vero Beach obligations to the FMPA power projects.  (As a part of that deal, FPL proposed that the customers of Vero Electric would pay a $26 million surcharge. FPL proposed the surcharge months after the purchase and sale agreement was approved by voters. Never resolved was the question of how to cover Vero Beach’s share of contingent liabilities associated with these power plants.)

Williams said today that before the FMPA board meets in mid-February, staff will calculate a price at which Vero Beach can exit from the FMPA with no further obligations. The FMPA’s Executive Committee, Williams said, may decide to seek and independent, external review of the staff-prepared valuation.

Williams explained that any deal will have to be approved by bond trustees, bond insurers, credit rating agencies, and the remaining member cities of the FMPA.  He indicated the process of calculating an exit price for Vero Beach, negotiating terms of an agreement and seeking approval from all stakeholders will likely take 12 months or longer.  In addition to these steps to be taken by the FMPA, Vero Beach must negotiate a new purchase and sale agreement with FPL, and must terminate its wholesale power purchase agreement with the OUC.

According to Williams, the FMPA’s is willing to help Vero Beach exit the agency in order to conclude a sale to FPL.  At the same time, he said, the agency will seek to protect the security of its bonds, while also ensuring that other FMPA member cities do not face higher costs as a result of the deal.

If the costs for Vero Beach to exit the FMPA with no further obligation, and no burden of contingent liabilities, is far greater than numbers proposed in the original deal, and if FPL is unwilling or unable to cover those additional costs, the customers of Vero Electric could be asked to help fund the deal through what might amount to a significant surcharge.

Meanwhile, Indian River Shores leaders, and their representatives of the Vero Beach City Council, namely Harry Howle, Laura Moss, Lange Sykes, continue to push forward with a partial sale of Vero Electric’s Shores customers to FPL for $30 million.  Howle, Moss and Sykes have said they are willing to accept $30 million for the so-called partial sale, despite the advice of a team of five utility experts who concluded a sale of the Shores customers base for anything less than $47 million will likely lead to higher taxes and higher electric rates.

Howle, Moss and Sykes have said they are pursuing the partial sale for the Shores “in the context of a full sale,” but they have yet to explain how and why a partial sale for the Shores is a logical and necessary “first step.”

If the Shores customers are sold to FPL in advance of the negotiations for a sale of the full system, the remaining customers of Vero Electric will have to shoulder the full burden of any surcharge needed to fund the deal.

Editor’s note: In the recent Vero Beach City Council election, Laura Moss and Lange Sykes were heavily supported by Shores residents and by FPL.  Moss received 70 percent of her campaign contributions from Shores residents, while Sykes took in 90 percent of his campaign funds from Shores donors.  Both Moss and Sykes were also supported by a political action committee that raised all of its $100,000-plus funds from Shores residents and from FPL.

 

 

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