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State panel demands answers from Vero on electric utility

(Week of February 24, 2011)

After 15 months on hold, a complaint lodged against the City of Vero Beach Electric utility for operating an “unregulated price monopoly” has led the Florida Public Service Commission to come out swinging.

The PSC recently sent the city a list of pointed questions, indicating that the agency is taking up the complaint in earnest. So far, the City Council has held off on hiring an attorney to fight back. Instead, the consensus was that staff should hand over the figures as best it can and beg for more time if needed. The answers are due in Tallahassee on March 3.

Among the data the PSC wants from the city is an accurate count of customers -- both inside and outside the city -- and an accounting of more than $26.5 million in fuzzy expenditures that the city passes down via utility bills each year.

The PSC also wants to review the city’s electric territory as it stood in 1981 and compare it to the customer base today to see if having 61 percent of the customers outside the city limits is in line with the intent of the territorial boundaries.

“There were three points. The first is where the PSC asks the city to show them how they got around the Stan Mayfield legislation by making them come clean on the number of customers,” said utility activist and CPA Glenn Heran.

Heran and Moorings resident Dr. Stephen Faherty originally filed the complaint against the city with the aim of rectifying the plight of electric customers suffering from soaring rates.

The customer count issue seems simple, but it’s something the city has creatively circumvented, thus denying South Barrier Island, Town of Indian River Shores and mainland county ratepayers any say in decision making.

The Stan Mayfield Bill would have required the city to set up a Utility Authority with proportional representation of customers. That body would have had the teeth to set policy and rates. The bill, which remains on the books, requires municipal utilities with 30,000 to 35,000 customers and ratepayers outside the municipal bounds to comply.

By eliminating accounts with duplicate names if people or businesses had more than one electric meter, Vero low-balled its customer count in 2007 contending it only had 27,000 customers to avoid compliance. But on various public documents, Vero lists a full complement of 33,408 customers. The PSC not only wants this reconciled once and for all, it wants to know how the 27,000 number was derived and who was responsible.

“Second, the PSC asks the city to show them how they are using funds from outside city customers -- to justify the cost of service for outside city customers,” Heran said.

According to records, the PSC wants to know why the city needs to charge County and Indian River Shores customers $4.5 million in revenue collected for “Electric Non-Departmental Expenses” out of which the city pays for things like the Boston consultants, and $22 million in “Other Revenue Requirements,” out of which the city transfers about $8 million into the general fund coffers supporting City Hall.

“The third point is for Vero to show their territory in 1981 and show the PSC their territory now, the number of customers then and the number of customers now,” Heran said, pointing out that because the Shores, South Beach and mainland county areas were in a growth mode the past 30 years, the proportions have strayed way past what was intended.

PSC Senior Attorney Martha Brown has given the City of Vero Beach just a few weeks to answer these questions, but with the city in disarray and the Finance Department seemingly unequipped to provide even the simplest financial analysis, it is unclear how this will be accomplished.

Acting Electric Utility Director John Lee, who will return to his post as Customer Service Manager on Feb. 28, said the city does not capture some of the data in the way the PSC is asking for and the city doesn’t have territorial maps showing where customers were in 1981 or where customers are today.

Faherty said he was pleased that the PSC has asked the city to produce some hard numbers -- numbers he’s been trying to get out of them for going on three years.

“The data it requested from the City should confirm the significant increase in the unrepresented electric customer population outside of the City,” Faherty said.

“Hopefully, this will lead to a survey of County, Shores (and City) electric customers to confirm their desire to leave the City electric service,” he said.

And what does this have to do with selling part of all of the utility?

“This should in no way impede what FP&L is doing now to make an offer to the City for its electric system,” Faherty said.

Faherty and Heran have no legal counsel to fight the city, or to fight other parties like the Florida Municipal Electric Association or the Florida Municipal Power agency who might jump into the fray to keep the PSC from meddling in the lucrative business of municipal electric utilities.

More than 30 similar utilities operate to help pad the general funds of the Florida cities and counties where they are located, as Vero does to the tune of nearly $8 million annually. About $5 million of that comes from ratepayers outside the city.

But Faherty said he won’t buckle to threats of mounds of paperwork and administrative hearings. After researching a signed and sealed deal with FP&L in 1976 that was dragged through court and finally thwarted by the federal government, Faherty said he’s not taking any chances.

“Until I get my first bill from Florida Power and Light, I’m sticking with this complaint,” Faherty said.

History of the complaint

Faherty and Heran lodged the complaint in September 2009 when they got fed up with the city’s failure to respond to ratepayer cries for mercy over electric rates 60 percent higher than FP&L at the time.

The City of Vero Beach hired legal counsel Robert Scheffel Wright of the Tallahassee law firm Young van Assenderp P.A. to squelch the complaint.  On Dec. 18, 2009, Scheffel Wright filed a Motion to Dismiss, which is still pending.

Then on Dec. 23, 2009, after meeting with city officials and receiving some assurances that Vero would address ratepayers’ concerns, Faherty and Heran placed the complaint in abeyance.

One big reason was that two private citizens with no taxpayer bankroll are no match for the city and its hired legal guns.

Heran, who credited Faherty with drafting the complaint, said he was told it’s rare -- almost unheard of -- for the PSC to even accept a complaint from private citizens. He said the issue of taxation without representation is the key to the argument, but that it doesn’t end there.

“Steve and I have always fought on multiple fronts.  We strongly believe in County customer’s freedom from the City of Vero Beach Utilities monopoly abuse.  But we also care for those customers within the City and wish to see them free of a staff-dominated, unnecessary government service,” Heran said.

“The City also needs to be free of powerful self interested lobbies such as the Florida Municipal Electric Association and Florida Municipal Power Association.  This complaint might help in that area too as other communities, suffering under similar abusive municipal-owned monopolies, may be watching,” Faherty added.

Faherty said the issue of 61 percent of the customers not having any say in the election of the people who make the utility decisions is of utmost importance.

“Lack of representation spills over into how the utility is run, rates established, voice in operations, lack of rebates, inefficiencies, entry into OUC contract, etc,” he said.

The goal and Vero’s next steps

What is the end game for this complaint?

“We want to have PSC declare that there have been significant changes in the City service area and in the interests of the population being best served by an electric provider, allow the outside City customers to switch to FP&L, the other service provider in this area,” Faherty said. 

Heran said he hopes the city just lets the PSC make a judgment.

“If the City Council agrees it’s in the best interest to sell the utility, there’s no financial reason to fight the PSC complaint, to use taxpayer dollars to fight this,” Heran said.

 “Why would the City want to fight its own set policy? They should just let it go. Let the PSC come in and do a territorial review.”