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Electric rate shock stuns island
BY LISA ZAHNER - STAFF WRITER (Week of July 16, 2009)

Sky high electric bills combined with near-record heat and the challenging economic environment are turning 2009 into a summer of discontent for beachside businesses, churches, schools and theatres as well as the barrier island residents who get their power from the City of Vero Beach utility department.

The unexpected – and generally unfathomable – twenty plus percent increase in electric bills that has occurred in the past couple of months is not simply putting the squeeze on island homeowners.

It is a tremendous extra burden for beachside shops and restaurants – and a drain on non-profits such as the Riverside Theatre, the Vero Beach Museum, and St. Edward’s School – all struggling to survive Vero’s traditionally slow summer months.

The City Council, meantime, after hearing the finance director tell them June 22nd that the electric utility is “broke” and “limping along” financially, decided the indicated action was to take a one-month vacation. The next Council meeting to discuss what most view as a crisis does not come until July 21st.

“It’s the only thing people who come in here want to talk about,” said Callie Corey, proprietor of the venerable Corey’s Pharmacy on Ocean Drive. “People are worried. They are afraid to open their bills.”

Brian Gilbert, owner of the Pearl restaurant which has seen its electric bill jump “about $1,000 per month,” said he fears many restaurant and shop owners do not have the financial cushion to endure six months of higher electric bills until promised relief comes with the city’s switch in January to a new power-buying arrangement with the Orland Utilities Commission.

Marty Walker, who said his bill at Cravings has gone up $500 per month, no longer believes the bills will come down in January anyway.

“I would almost bet anything that they will find something else or some other reason to keep them high, they’ll have some other crisis,” he said, referring to the City Council, which approves the electric rates. “If not, they will jack something else up instead.”

While Gilbert vows that “we will weather the storm,” not all beachside businesses may be that resilient.

“For the smaller shops on Ocean Drive that are fighting to survive, utilities are a significant expense and it will reduce their ability to pay their other bills,” said Andy Lawrence, president of Marine Bank and Trust. “Over time, this will have a marked impact.”

Among those feeling the impact are our cultural institutions.

John Moses, Managing Director of Riverside Theatre and Riverside Children’s Theatre, held a Save Energy Staff Meeting on July 7th about the theatre’s electric bill after seeing his fuel cost adjustment jump from $5,000 in June to $7,500 in July. The whole bill runs from $14,000 to $20,000 per month.

Extrapolated over the balance of the calendar year and figuring in for increased consumption when the performance season starts, Moses has had to add $20,000 to his utility budget — and he’s not exactly sure where that money will come from. “It’s certainly not an uplifting position to be in, we’re coming into a time when we have to increase the budget not to grow programs, but just to maintain what we have.”

Moses notes that he cannot pass along the higher electric bills to his patrons. “With the economy, we have had to do a lot of discounts and things to get people in the theatre and, although ticket sales are up, revenues are still down,” he said. “If we raise the prices, people will stop buying tickets.

The Vero Beach Museum of Art is probably held captive to a greater degree than any other electric customer on the barrier island. They have 54,000-square feet of space under air that must be kept between 72 and 74 degrees to protect the artwork owned by or on loan to the museum.

“Electricity is a critical to the museum, we don’t have the option of just turning the thermostat up to 78 degrees,” said Executive Director/CEO Lucinda Gedeon. “Plus our systems are old, the museum is 23 years old and some of the units are the original ones that were here 23 years ago.”

Gedeon said that, before the recent increases, the museum spent about $165,000 per year on utilities. She’s been working on her budget for the 2009-2010 fiscal year, which started July 1 and had not included a sizeable increase for utilities. Though she had not yet received her July bill, she was expecting the worst.

“I have been warned that we can expect a huge increase,” she said. “This will be a challenge, because we’ve already had to take a 17 percent cut from last year’s budget. Cutting programs for us is not really an option because we are a community-based museum.”

The latest hikes in electric rates have even have impacted the clergy.

“The Eucharist does not stop because of the electric bill,” said Holy Cross Catholic Church parish manager Debbie True, who doesn’t want parishioners to sweat through mass.

“But for the summer, we’ve unplugged the refrigerator and freezer in the Parish Hall unless there is a function going on, then we’ll plug them back in,” she said. “I just don’t understand these rate increases all of a sudden.”

True said parishioners have taken up special collections to provide a fund for people in dire straits due to the economy, and it’s a good thing because they recently have been bombarded with calls.

“People can’t pay their electric bills and buy food, some of them are unemployed, but most of them are working and they just can’t afford the increase in the electric bills,” she said. “Some of them have already been shut off or are on the verge of being shut off. We’ve been giving them Wal-Mart cards so they can buy food with that and helping them get food from local food banks so they can pay their electric bills.”

Interestingly, the kicker in the high bills is that while Holy Cross Church (and for that matter Riverside Theatre and the Vero Beach Museum as non-profits) are theoretically exempt from taxation, the City of Vero Beach has found a backhanded way of taxing them since a portion of their electric bill goes to pad the city’s general fund. This nearly $7.6 million collected from your electric bills (a $5.9 million direct transfer plus $1.7 million in personnel fees charged to the electric utility) far exceeds the receipts from property taxes collected by the City and keeps the millage rate down to 1.94 for property owners.

So the City of Vero Beach, witting or not, has come up with a clever way of taxing churches and nonprofits without sending them a tax bill.

Someone with an even bigger electric bill than the museum is Marco Scherer, general manager of the Vero Beach Hotel and Spa, which is part of the Kimpton Hotels chain. The tab for powering the 113-room oceanfront resort with a pool, spa and two restaurants was about $36,000 per month before the increase, and that was with many energy saving measures already in place.

“We did budget for an increase on all utilities over 2008; however we did not expect this high of an increase,” Scherer said. “We were assuming that with the hardships of the current recession, the utility increase would be minimal in order to help the economy.”

As part of its green philosophy, Kimpton has a formal program that employees and managers follow to reduce costs and the carbon footprint of its properties, including motion-sensors to control lighting in storage areas. But the rooms still need to be cooled, and laundry still needs to be done, as well as cooking, vacuuming and running the televisions and kitchenettes.

Scherer said his resort strategically is pricing its rooms in the $120 per night range to have a competitive advantage over hotels elsewhere in the state this summer, so will unfortunately have to absorb the increased utility costs.

“We currently have a 70 percent occupancy rate and that’s about 20 or 30 percent higher than most of the hotels in Palm Beach and Miami,” he said. “If we raise the rates to compensate for the higher electric bills, we will lose that.”

Michael Mersky, the new headmaster at St. Edward’s School, is grateful the school had the foresight in 2006 to install a Honeywell system which controls all the lighting and air conditioning on campus.

The system automatically turns lights off when there is no motion in the room for 10 minutes and adjusts the temperature upwards about 10 degrees after normal school hours. Mersky found this out first hand working late in a hot office.

He said St. Ed’s saw a 15 to 25 percent decrease in electric usage in 2006-2007 through 2008-2009, allowing the school to recoup most of the costs of the new system. This year, savings from the new system will go to pay the higher rates from the Vero Beach utility.

“We adjusted our budget on the fly, about a month ago we knew we were going to have first a 3 percent increase and then an 18 percent increase on top of that,” Mersky said. “We were able to adjust because of what we had done in 2006.”

So being a good steward of the environment, it seems, is not in this case going to pay dividends – but gets St. Edward’s back to square one.

But at least, Mersky says, we will “not have to pass along higher utility costs to our families.”

Back at Cravings, Walker and his wife Mary Sue hear all the moaning and groaning from local residents and shopkeepers as they file in for morning coffee and baked goods.

Walker says he has called the City numerous times and asked for answers, advocating some relief for local small businesses trying to survive the recession.

“What are we supposed to do, they’ve got us over a barrel and I’m livid about it,” Walker said. “Nobody can give you any answers and nobody takes responsibility for this. Nobody will just tell you that they made a mistake, they all just say it’s the fault of the people who were there before, but a lot of those people are still there.”

“One of my employees brought me her electric bill and it went up $90 last month and she only lives in a 2-bedroom apartment,” he said. “I had to tell her that there’s nothing I can do about it. I can’t pay her more money because I’m paying an extra $500 per month on the electric bill here.”

The Pearl’s Gilbert tells a similar story. He says in part as a result of the surge in electricity prices, he has closed one dining room at lunchtime and laid off four servers and some kitchen help. He also feels that he cannot nickel and dime his customers to help offset his electric bills.

“We have to weather the storm and we will weather the storm,” he says.

Walker suggests that if the city can’t get electricity rates down to competitive levels, and fast, they should look at other options because the current situation is intolerable and unsustainable for local businesses.

“Maybe we need to get out of the business and get someone like FPL who is in the power business,” Walker says. “Why are they so adamant about keeping the power plant? There’s got to be more to the story and it’s probably not in our best interests.

“I’m busy and I don’t have time to sit down and become an expert in this, but I know business,” he says. “You need to get someone in there who is accountable. What’s happening here would never fly in the business world.”