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Shores: 'Grave concern' electric rates will get worse

STORY BY LISA ZAHNER (Week of August 28, 2014)
Photo of Shores utilities counsel Bruce May.

The Town of Indian River Shores wants low Florida Power and Light rates for all its residents, and the head of the Shores legal team made that infinitely clear last week during the first of several conflict resolution sessions prompted by the Town filing suit to exit the Vero electric system in November 2016.

“The city has systematically ignored the concerns of its outside customers,” said attorney Bruce May, who heads up Holland and Knight’s utilities division, adding that at the top of the list of those concerns is the fact that “the city continues to charge excessive and monopolistic rates to its outside customers.”

May said his client, the Town, has no reason to believe that the rate disparity will get better any time soon, and added that Town officials have “grave concern” rates will actually get worse as the bad management decisions and speculative investments of the Florida Municipal Power Association come home to roost in the next few years.

What May called “especially unconscionable” is the fact that the city siphons off millions – almost $6 million in direct transfers plus nearly another $2 million in overhead charges – from utility revenues to subsidize property taxes for Vero residents. That, May alleges, amounts to “unjust enrichment.”

In response, Vero’s attorney Robert Scheffel “Schef” Wright admitted last week what anyone who has seen the city’s financials already knows: Vero electric cannot match low Florida Power and Light rates.  But legal teams for the Shores and Indian River County have agreed to humor the city by spending time analyzing what can be done with rates.

A Sept. 26 meeting will be devoted to the topic of what Vero might be able to do to provide “meaningful rate relief.”

This foray into the hypothetical is a slight detour in the state-mandated conflict resolution process which must play out before the Shores goes forward with its lawsuit against the city.

Chances of Vero coming up with a plan that will satisfy the Shores are very slim.

“Our rates are what they are because our costs are what they are,” Wright said. He added that, by renegotiating Vero’s wholesale power contract with the Orlando Utilities Commission and mothballing Big Blue, the city could maybe “close the gap by half.”

Half of a 30 percent rate disparity will not cut it with the Shores, May retorted. “Just to manage expectations, when we’re looking for reasonable rates, we’re looking for comparable rates to FPL,” he said.

County Attorney Dylan Reingold, representing South Beach and mainland county customers, agreed. “I’m not sure half gets us where we want to be,” he said.

Wright, visibly frustrated and harried, pleaded with the opposing legal teams for help. “If you guys have a rate consultant and want to send him along,” he said, “we don’t claim to have a monopoly on ideas.”

The Town has budgeted $250,000 this year and $250,000 next year to fund its legal team. That might sound like a lot of money for a small municipality, but to put it into perspective, that quarter of a million dollars represents the gap between Vero and FPL rates on just the John’s Island Club electric bill.

Brian Kroh, who has been the general manager of John’s Island for the past 14 years, was one of about a dozen people who spoke at last week’s joint meeting of the Shores, Vero and the County at the Shores Community Center.

He said the club pays a whopping $700,000 per year to Vero electric – an estimated $250,000 more than John’s Island would pay to FPL for the same power. That’s above and beyond the millions in higher rates paid by the community’s 1,350 homeowners.

Sea Forest resident Ted Robinson, who famously went to jail in December 2012 after a tussle with Vero electric workers who came to cut off his power, seemed baffled in his impassioned speech from the podium during public comment.

“I’m sorry, but I don’t see what a meeting of all of you is going to do to get utility rates down,” he said. “Just meetings, meetings, meetings and lawyers running up the bill. How is more lawyering going to lead to fair taxation and lower utility rates?”

May explained that, after patiently waiting and hoping in vain that Vero would actually be able to achieve a sale of its utility to FPL, the city had exhausted the Town’s ability to endure being held captive to unreasonable rates.

“The Town had two choices, do nothing and allow residents to continue to be systematically overcharged, or to seek relief.”

The outcome the Shores is seeking in the lawsuit would require Vero to do all of the following:

-   Give immediate and substantial rate relief (i.e. FPL rates);

-   Refund monies taken in through excessive rates since the city phonied up its customer count to avoid state regulation in 2008;

-   Turn over management of the utility going forward to a utility authority with actual decision-making power.

If all three of those things don’t transpire, the Town has told Vero to vacate its right of way when its 30-year electric franchise agreement expires on Nov. 6, 2016.

The Board of County Commissioners, which joined the conflict resolution process as a participant and which has appealed to the Florida Public Service Commission for a ruling on the Vero electric situation, seemed a bit more open to compromise.

Reingold agreed that the best course would be if Vero could complete the sale to FPL, but said if that can’t happen, the county would accept “some sort of functional equivalent” that would include substantial rate relief and an end to the practice of padding the city general fund with electric revenues.

With regard to the sale to FPL, Wright said, “We would close that transaction today if we could,” but that roadblocks thrown up this spring by a standoff with the FMPA and OUC over contracts have made that impossible.

Wright admitted there’s no one currently brainstorming on how to close the sale, saying it’s been “on the back burner” for months.

“The city got itself into this mess and the city needs to get itself out. Stop hiding behind FMPA and OUC,” May said, almost scolding Wright for his litany of excuses.

“My conflict is not with the FMPA. My conflict is not with OUC. My conflict is with the City of Vero Beach.”

If there is no resolution after all 15 elected officials from the Shores, Vero and the County meet, probably in late October or early November, the lawsuit will go forward.

Potentially, current and past elected officials such as former mayors Tom White, Sabe Abell and Kevin Sawnick, plus key figures such as former City Manager Jim Gabbard, former City Attorney Charles Vitunac, former Utility Director R.B. Sloan and others, going back to 2006 could be subpoenaed to testify and provide evidence in the case.

Rounding out the witness list would likely be representatives from FMPA, OUC and the city’s former Boston-based utility consultant, Sue Hersey. A massive public airing of the Vero’s dirty laundry would presumably ensue for May and his team to prove that Vero broke the law and mismanaged its utility.

Attorneys from Holland and Knight will be back in town Friday morning to update members of the Shores Town Council on the status of the case when the council meets at 8 a.m. in chambers at Town Hall.