FPL talks tough over Vero electric deal
Florida Power and Light exchanged some tough talk last week with the statewide power co-op, with FPL President Eric Silagy reminding the Florida Municipal Power Association that in exchange for a proposed $52 million payoff, the FMPA is expected to work with – not against – Vero Beach in its bid to exit the organization.
The day before Silagy’s letter to FMPA President Nick Guarriello, Guarriello issued his own letter complaining that the $52 million in cash plus options in FPL’s Turkey Point nuclear plant doesn’t neutralize all the heartburn the FMPA will feel from letting Vero leave the co-op and sell its electric utility to FPL.
Guarriello’s letter pointed out that FMPA has no need for Vero’s share of the power from the co-op – hence the $52 million payoff to compensate the FMPA for keeping its own overpriced power for up to three years instead of making Vero take it.
Given that Vero has agreed to pay the Orlando Utilities Commission a mere $34 million to take Vero’s share of the power from the co-op permanently after the first three years, the $52 million payment to FMPA to offset just three years of taking overpriced power would seem extremely generous.
But there are still other pending issues, Guarriello said, before he could recommend a “yes” vote of co-op members needed to seal the deal.
The FMPA head also pointed out that he and Silagy had agreed to keep the $52 million figure secret, yet FPL released it to the media when the company announced a plan to split the sum with Vero’s ratepayers.
Finally, the veritable “kitchen sink” provision in Guarriello’s letter states that “upon its withdrawal date, Vero Beach must pay all stranded costs that are or could be incurred by the remaining (All-Requirements) project participants because of its withdrawal.”
The phrase “that are or could be incurred” left some observers breathless.
As for FPL’s hopes of getting this all done by Jan. 1, 2015, Guarriello tossed a big bucket of cold water on that one.
“It has been reported that you (Silagy) have said: ‘I don’t see any hurdle that can’t be overcome by Jan. 1.’ On the contrary, I and FMPA’s general counsel have said to you it will be very difficult to achieve a closing by the end of this year,” Guarriello wrote.
To all of this bellyaching, Silagy reminded Guarriello that the FMPA would need to get fully on board with the sale of Vero electric as part of the $52 million deal, and reiterated that a January closing is very do-able if everyone cooperates.
“Our goal is to close the sale by January 1, 2015 and we see benefits to all parties by accomplishing the same within that time frame. Your letter notwithstanding, we see no reason that date cannot be achieved if all parties are truly committed to work together in good faith and with due diligence.”
Silagy outlined what strings would be attached to the money.
“The payment and option agreement are subject to the following additional terms, which have been previously discussed at length: FMPA will publicly and privately support the acquisition and take all actions as reasonably requested by the City of Vero Beach and FPL to facilitate the acquisition in an expeditious manner ...
“We expect FMPA to diligently and in good faith pursue all consents and approvals on an expeditious basis, including those of municipal project members to the extent necessary ... FMPA will honor the City of Vero Beach’s outstanding request for accelerated withdrawal from the All-Requirements project for purposes of closing the acquisition.”
Vero Councilwoman Pilar Turner, who represents the city on the FMPA board, speculated that the pushback from Guarriello emanated from the FMPA’s utter shock that FPL had actually agreed on a plan to cough up the $52 million, an amount that sources close to the negotiation had termed “ridiculous.”
And indeed, if the $52 million payment was just intended to cover FMPA’s agreement to take back its own costly power for three years, that might well seem ridiculous.
But Silagy points out that the $52 million plus the nuclear options were also intended to buy the FMPA’s good faith and cooperation in helping Vero get the sale across the finish line. In the weeks ahead, the question will be whether or not the FMPA’s attorneys and members follow through on what seems to have been a gentleman’s agreement between Guarriello and Silagy.
There will be no payoff to the FMPA, however, without the approval of the Vero Beach City Council, and eventually the approval of the city voters. City officials say another referendum would be required to execute a new, substantially different contract from the deal approved nearly 2 to 1 by voters in March 2013.
As of press time, the matter was set to be discussed at Tuesday’s council meeting, with FPL’s External Affairs Director Amy Brunjes making a formal presentation to the city.
The council was not expected to make any definitive decision about going forward, but instead refer the proposal to the city’s Utilities Advisory Commission and Finance Commission to be vetted in joint session later this month.