Vero may need to pay $26 million to escape clutches of power co-op
Weeks before the announcement of a plan to pay what amounts to a $52 million ransom to finally get Vero Beach out of the electric business, the old guard was organizing to trash the idea.
With Florida Power and Light offering to pay half the total if Vero electric customers would cover the other half, opinion polls popped up on the web asking readers whether or not they thought paying $26 million to get the sale of Vero electric to FPL done was a good idea.
As of Monday, a small number of the usual suspects who haunt these online discussion boards were voting no to paying the $26 million by a 4-to-1 margin. That’s hardly a surprising gut reaction to the disappointing shift in the terms of the deal.
What the polls didn’t ask, however, was whether Vero electric ratepayers would rather pay $26 million over several years on their utility bill – which, by the way, would still be lower each month than what they pay now to Vero electric – to get the sale to FPL done? Or whether they would rather be stuck with high Vero Beach electric rates forever?
That question might have netted different polling results. Given the fact that Vero customers currently pay more than $20 million extra for their electricity each and every year they’re not on the FPL system, that question wouldn’t seem to be a no-brainer?
Pay $26 million extra once to get out of the electric business for good, or pay $20 million or more extra to feed the inefficient Vero electric utility, to pad the city’s general fund, to repair the aging Big Blue power plant, to cover rising employee health care costs, to fund the exorbitant pension debt – every year, year after year, without end.
Granted, the prospect of coughing up $26 million over three or four years to pay off the members of the Florida Municipal Power Agency to absorb some of the power Vero now buys from the power co-op at prices way above market isn’t a very happy one.
Unfortunately, it appears to be the best solution put forth to date, and the only one that gives Vero’s 33,000 customers any hope of ever getting a bill in the mail from Florida Power and Light.
FPL External Affairs Director Amy Brunjes explained the plan to Vero Beach 32963 and to some city officials.
“What Amy said is fairly simple actually. FPL is going to pay $26 million and the ratepayers would pay the other $26 million over the course of a certain number of years (over and above the regular FPL rate),” said Mayor Dick Winger on Monday.
Since the announcement, Winger said he’s gotten lots of calls and feedback and has done his best to clear up confusion and settle folks down about what they think may or may not be happening.
We frankly don’t know much, Winger said, concerned about adding to the spin while the city waits for a formal presentation by FPL on March 4. “I’m in the process of vetting it and no matter what I say I don’t think it’s useful.
“I’m not that concerned,” Winger said, about the negativity that’s swirling around in the current vacuum.
“But people need to understand it. I think there’s some confusion that people don’t really understand,” he said, noting that things like the city’s 6 percent franchise fee has been tossed into the mix and that’s a totally separate issue from the plan to pay off the FMPA.
“They didn’t understand that what FPL was talking about is the $26 million that would still result in a rate decrease, and then in FPL rates when it was paid off.”
Does Winger see any immediate deal-breakers in the proposed solution by FPL? “Not in this, but I’m still vetting it.”
Like all compromises, the plan contains something everybody can hate – at least a little.
For FPL, it means $26 million out of its coffers to finally, hopefully, get this deal across the finish line. On top of the $179 million package FPL was already set to pay, that makes $205 million. That’s $6,200 per customer, a price some would insist is still a bargain.
For Vero electric customers, it means a bit of delayed gratification. For somewhere between two and four years after the projected 2015 closing date, city customers would get FPL rates, but an unknown amount would be tacked on for a period of two to four years until the FMPA was paid in full.
FPL is offering to loan the city its $26 million share of the $52 million interest-free. Monthly bills are expected to go down substantially at closing, but not as much as they would have given an immediate switch to FPL rates. That’s obviously a let-down, but better than the prospect of high Vero rates forever.
For the FMPA, it’s potentially a dangerous deal because it could be replicated in other member cities that may want to get out from under punishingly high electric rates. That could cause the power co-op to throw some other roadblocks in the way to make it even tougher for Vero to close the deal.
Councilwoman Pilar Turner, who represents Vero on the FMPA board, said she got “the chilliest reception ever” from her fellow members from municipal utilities across Florida last week when she attended a board meeting. Why? The organization is severely leveraged and could surely use the cash. Shouldn’t member cities be happy to be getting a $52 million infusion of much-needed capital? Apparently not.
“I think they were really shocked. I think they just never believed that FPL would come back and say yes, and say let’s find a way to split this ($52 million) and make it work,” Turner said, noting that she feels the $52 million figure was “pulled out of the air” and does not equate to any actual cost of getting Vero out of the FMPA.
Turner said she considers Vero and its ratepayers inside and outside the city “unbelievably lucky that FPL has hung in there.”
“Surely, it is not what we hoped for when we started,” Turner said of the $26 million surcharge. “But I think this is the last opportunity.
“We’re already committed to this craziness with the FMPA until 2066 and that could get extended,” Turner said, if the FMPA keeps refinancing its estimated $2.3 billion debt and pulling cash out to fund capital expenses. “We’ve been paying on these projects (Stanton coal plants and the St. Lucie nuclear plant) for 30 years and the FMPA still owes the same amount of money. We still have no equity.”
Looking at the sketchy alternatives being floated by Councilman Jay Kramer, and not knowing what if any rate relief those endeavors might bring, Turner said she thinks the choice is clear, unless some detail emerges which convinces her this is detrimental to the city.
“I really think we’ve got to go for it,” Turner said.