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How does Vero now proceed on the FP&L electric offer

(Week of April 7, 2011

Florida Power and Light on Monday offered the City of Vero Beach up to $100 million cash, low FP&L rates for its customers, jobs for the city’s 113 electric utility employees for at least two years, assumption of up to $11.3 million in city pension liability, plus $1.7 million in new property tax revenues.

Sounds like a sweet deal.

Now the question is whether or not Vero decides it needs an outside negotiating team from GAI Consultants and Gray Robinson law firm to evaluate the offer for a fee of upwards of a quarter of a million dollars.

On March 23, in anticipation of an FP&L offer that was expected sometime around Easter, GAI principal Gerry Hartman – also the principal engineer on recent water-sewer projects for both Vero Beach and the Town of Indian River Shores – was asked to put together a proposal of what GAI could do to assess the sale to FP&L.

The 32-page document outlines the estimate of $141,200 for appraisals, $43,200 for engineering, and a minimum of $25,000 for legal services (not including negotiating a deal), and $30,000 in something called “General Advisory Services.” All of this, of course, is plus travel and other reimbursable expenses.

Then there is a section called “These activities not included above, yet may be desired.” Items there include optimization of the electric system, rate and charge analysis, competitive market assessment for the power plant and transmission and distribution, and the catch-all other tasks and activities upon request and authorization.

“I do not think we need to spend that kind of money; what they proposed is an astronomical figure,” Councilwoman Tracy Carroll said Monday. “I cannot imagine how they could spend that number of hours to come up with that amount of money, where FP&L has just finished doing a similar type of work for free.”

FP&L began digging into a potential sale more than a year ago, looking at documents, examining the utility in person from an operational and engineering perspective, appraising the assets, crunching the numbers, talking to Orlando Utilities Commission and to the Florida Municipal Power Association.

So how long would the GAI project take to duplicate those efforts? The short answer is the firm has no idea.

The appraisal would be expected to take 132 days or until about August. Briefings on findings would be given at 45 days, 75 days and 105 days. “To be determined” was the only timeline given for review of the FP&L offer, and a customer and general fund impact analysis. The timeline for assisting with a counter offer to FP&L, if needed, was also “to be determined.”

GAI was brought to the table to make a pitch by Interim City Manager Monte Falls, without a formal Request for Proposal, because GAI emerged as the top-ranking consultant from the joint Vero-County-Shores committee tasked with hiring someone to evaluate options for water-sewer regionalization.

Councilwoman Tracy Carroll said on the eve of Tuesday’s meeting to consider the proposal that she’s not buying what GAI is selling.

Mayor Jay Kramer, who has advocated for an appraisal and to infuse “competition” in the process -- and recently for looking at selling out to a private company to set up a utility authority --  could not be reached for comment.

Vice Mayor Pilar Turner said she’s not in favor of awarding the business to GAI without going out to bid and she said the scope and cost of the GAI proposal is way out of line.

“I don’t think we need to spend $141,000 on an appraisal, we just need review of FP&L’s numbers,” Turner said.

“I think we need to scale back the scope of work and put it out to bid. GAI was chosen as a water-sewer consultant and electric has nothing to do with water-sewer.”

Councilman Brian Heady had an alternative idea.

“I think we need to hold off on the proposal until we figure out what this offer from FP&L means,” Heady said.

“What we really should do is engage the Florida Public Service Commission and ask for their help, for them to assess whether or not this is a good deal,” Heady added.

If the City of Vero Beach Electric Utility comes under PSC regulation – as is being proposed in Tallahassee by Representative Debbie Mayfield –the state regulatory agency would presumably be required to evaluate the details of the offer from the standpoint of protecting the interests of Vero Beach electric ratepayers.

Currently, only FP&L ratepayers come under PSC protection as Vero Beach Utilities is not a regulated entity.

More than 30 other municipal electric utilities, joined under the lobbying umbrella of the Florida Municipal Electric Association, have been fighting hard to keep Mayfield’s bill from ever seeing the light of day.

A municipal electric utility coming under PSC regulation could set a precedent that would endanger the unregulated status of other municipal utilities with customers outside that municipality’s political boundaries.