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Vice Mayor Kramer says Vero electric 'sale is dead'

STORY BY LISA ZAHNER (Week of November 21, 2013)

“The sale is dead,” Vero Beach Vice Mayor Jay Kramer said in an interview with Vero Beach 32963 on Friday.

What? After the two city council members who just elected Kramer vice mayor, Mayor Dick Winger and council member Amelia Graves, have just assured all that the sale of Vero electric to Florida Power & Light is a done deal?

Well, said Kramer, the sale is dead “at least until 2016,” referring to the date after which Vero can more easily exit some of its obligations with the Florida Municipal Power Agency.

In the meantime, Kramer said, the city needs to look at some other options for enabling Vero electric to offer competitive rates.  Vero electric rates currently are more than 40 percent above FPL rates.

First, he said, “we need to re-negotiate the Orlando Utilities Commission contract,” referring to the power Vero now buys from OUC.

Kramer says there is a clause in the OUC 2008 deal that states Orlando cannot broker a better, cheaper deal with another customer than it gave Vero. After Vero gave its notice to OUC that it would be pulling out of its 20-year, $2 billion contract which took effect in January 2010, OUC negotiated another wholesale power deal with the City of Lake Worth in Palm Beach County.

“I’ve heard that they got a better deal by 10 or 15 percent,” Kramer said.

The contracts are not easy to compare because Sue Hersey, the million-dollar Boston consultant who brokered the Vero deal and kept even council members from learning the financial details for two years, also shepherded the Lake Worth deal, resulting in pages and pages of solid-black redactions.

Lake Worth’s attorneys are claiming that “trade secrets” are hidden on those pages, same as Vero’s attorneys claimed.

“Schef Wright, the City’s attorney for the power procurement, has confirmed with OUC that OUC still treats the redacted information as trade secret exempt from public disclosure,” responded attorney Christy Goddeau on Friday to a request by Vero Beach 32963 for the full contract. Public records show Kramer got the same response from Goddeau when he asked for the un-redacted contract.

Kramer said he’ll find out come January when the Lake Worth deal kicks in and a few weeks later they get their first bill from OUC. That will be the moment of truth, he said, and if Lake Worth is paying less for power than Vero, Vero should use it as leverage to go back and tweak its own deal.

But it will take much more than cheaper power to make Vero remotely competitive with today’s Florida  Power & Light rates. The OUC contract, Kramer contends, is the main reason why the city is required to keep Big Blue operational – an expensive endeavor. That, he said, would be negotiable if the city re-opens the OUC contract.

As for the city’s hefty overhead expenses, Kramer proposed hiring consultants to do an optimization study, similar to a study for the city’s water-sewer utility. In fact, he’s proposed hiring the same people – Gerry Hartman of GAI Consultants and Thomas Cloud of the Gray Robinson law firm – who famously appraised the Vero electric utility at $200 million.

Where critics of Vero electric, and of municipal utilities in general, hold out little hope that a city government is capable of running an electric utility that can offer rates competitive to FPL, Kramer has carried this torch now for nearly three years.

But up until now, he has not had a city council majority that was willing to even consider such a wide detour from the current course of selling the whole utility to FPL.

Will Winger and Graves support Kramer’s proposed maneuvers now?  It was impossible to ask them for this story because of restrictions of the Sunshine Law.

But Kramer’s statements drew strident reactions from proponents of the sale to FPL. Utility activist Stephen Faherty, a Moorings resident who has studied the utility business in Florida, said he thinks Kramer and the council should honor the city’s commitment to the contract with FPL by allowing the sale to work itself out.

“They ought to finalize the existing proposals because they’re waiting to hear back from the FMPA on the proposal from FPL,” he said. “It seems like that needs to be finalized before they go off in a different direction and possibly incur fines and penalties from FPL, and additional consulting fees.”

Faherty said he wondered where Kramer’s proposal would leave the 20,000 Vero customers who live outside the city limits – customers who are counting on getting FPL rates via the sale of the utility.

“If they were approaching that type of optimization study, I would certainly believe that the outside customers would like to be able to go with somebody else to have some protections as ratepayers,” Faherty said. “Inside, municipal ratepayers have the protection of voting people in or out of office, but outside customers can’t vote and have no protections under the Florida Public Service Commission.”

Commissioner Bob Solari, a Central Beach resident who represents Vero Beach plus the outside electric customers in Indian River Shores, South Beach and the mainland county on the Board of County Commissioners, characterized Kramer’s plans as political maneuvering. “"I'm not surprised Councilmember Kramer would go in this direction, but I'm still stunned," he said.

“He’s been there for three full years, he’s seen an optimization study for the water-sewer utility that showed they had 100 percent more employees than industry metrics suggested, which to me points to corruption,” Solari said. “So this study on water-sewer came out pretty much the time Kramer came on board and it took him this long to figure out that they needed an optimization study of the electric utility?

“It certainly seems like an act of bad faith,” Solari said of Kramer’s diversionary tactic.

Solari took issue with Kramer’s presumption that Big Blue could simply be powered down, even with a successful renegotiation of the OUC contract.

“How can this be a realistic plan if even FPL cannot figure out a way without the power plant for three or four years?” Solari asked. “My understanding is that the power plant is needed for peak period for transmission limitations.”

Though Solari doesn’t agree with Kramer’s assertion that the sale to FPL is dead, he also doesn’t think it’s a “done deal” as was alleged during this election season. “In something as complex as the sale of the Vero electric utility, I don’t understand how it can get done if you don’t have everybody working hard together to get it accomplished.”