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Winger: Low hopes for power meeting

STORY BY LISA ZAHNER (Week of March 27, 2014)

Mayor Dick Winger is set to meet with decision-makers at the Florida Municipal Power Agency on Wednesday about the sale of Vero electric to Florida Power and Light, as Vero’s options for getting lower rates any other way seem to be evaporating.

Winger warned, “Don’t expect much” from his visit with FMPA President Nick Guarriello and legal counsel Fred Bryant because he’s not going there to negotiate terms – only to try to set some terms to re-engage the FMPA and FPL in direct negotiations.

After a flurry of barbed letters was hurled back and forth between the power co-op and the behemoth electric company, FMPA told Winger to leave FPL out of any talks.

Winger said FMPA officials also told him to leave the city’s transactional attorneys, John Igoe and Rick Miller, at home.

“I think it’s completely inappropriate to exclude our transactional attorneys,” said Vero Utility Commission Chair Scott Stradley, but Winger said he intended to bring along City Manager Jim O’Connor, City Attorney Wayne Coment and retired attorney and Riomar resident George Christopher, who Winger described as a long-term, trusted advisor. Christopher serves as an alternate on the city’s utility commission and is a major critic of the current deal to sell Vero electric.

Prior to Winger’s meeting, the city’s utility commission, chaired by Stradley, will convene at 10 a.m. Monday to consider FPL’s proposal to pay the FMPA $52 million to extricate Vero from some of the costly long-term power contracts that inflate city customers’ monthly bills.

FPL has agreed to cover $26 million of that cost, loaning the city the other $26 million interest-free for three or four years while its 34,000 ratepayers repay FPL. Ratepayers would see significant discounts of 8 to 18 percent immediately at closing and then the full 24 percent reduction in cost, down to FPL rates, after the obligation to FMPA was met.

No one affected by the sale is leaping for joy at this option, but as a joint session of the city’s advisory commissions revealed last week, it appears to be the last great hope of getting reasonable electric rates.

After alternative proposals were rejected by the city’s utility commission, the council, led by Vice Mayor Jay Kramer, reconstituted that commission in an effort to put more city residents on it and get a different opinion. The new commission, complete with more than a few skeptics on the electric sale, voted last week to pursue the FPL sale with gusto, despite its reservations about all the twists and turns that have brought Vero to this critical juncture.

The commissions reviewed a budget pie chart devised by city staff that clearly showed limited opportunities to cut costs, beyond the city’s two albatrosses – the FMPA contract and the wholesale power contract with Orlando Utilities Commission. Those two power contracts account for more than 60 percent of the utility’s budget.

“I don’t think the city’s been engaged enough into finding a solution to those contracts,” Winger said. “It takes an agreement and it takes us satisfying what it takes to make that happen. I’ve studied all the contracts and I do believe that it’s possible to complete the sale, but I can’t assure you that’s going to happen.”

City Manager Jim O’Connor gave the commissions little hope that Vero would be able to re-negotiate better terms with OUC, a solution that has been touted by Kramer and others.

“Whenever I bring this up to OUC, they say, Jim, we really like our contract, and you have to make us whole,” O’Connor said, adding that the $20 million penalty agreed to for Vero to get out of the OUC contract is contingent upon the sale to FPL.

“What I was told by OUC is don’t use the $20 million in the FPL deal as a guiding light going forward if we want to renegotiate our deal. It would be $20 million plus considerations,” O’Connor said.

The OUC contract does contain a re-opener, with notice due in 2017 and changes possible in 2020, but O’Connor explained that is less than a sure thing, and at OUC’s discretion. “What we’re heading for there is probably litigation,” O’Connor said, should the sale fail and the council be bent on trying to get the cost of wholesale power from Orlando down to reduce costs passed onto customers.

The commissions also voted down both Kramer’s plan to refinance the city’s electric utility debt to get better interest rates – turns out it wasn’t that simple as the bonds can’t just be paid off before the call date without penalty – and his pitch to finance routine maintenance of the power system going forward.

The advisory panels did, however, approve a $3 million pre-payment of a bank loan that could shave a mere percent off customers’ bills beginning in October. In February, the council voted to trim rates by 1.1 percent.

Currently, FPL rates are about 24 percent lower than Vero and the difference adds up to more than $20 million extra paid by the community each year in electric bills, so incremental reductions are better than increases, but don’t come close to matching FPL rates.

More than a dozen other cost-cutting proposals – one as drastic as shutting down the power plant and laying off plant employees to get the rates down by at the most 5 percent – are still on the table, with city staff promising to conduct a Strengths, Weaknesses, Opportunities and Threats or SWOT analysis on each one, a process that could take weeks or months.

FPL is set to present its full plan to the commissions on Monday and then the council meets at 9:30 a.m. Tuesday. Members agreed that FMPA officials would be invited, and encouraged to attend any further discussions on the Vero electric sale, in hopes of avoiding the nasty back-and-forth that’s occurred in past weeks.

“I think in order to get an understanding of what they want, you need to have FMPA here,” utility commission alternate Christopher said.

The Indian River Board of County Commissioners has already endorsed the $52 million plan to pay off the FMPA, voting unanimously last Tuesday on a formal resolution and sending a letter to Winger offering commissioners’ best wishes as he forges ahead with negotiations.

The Indian River Shores Town Council, by way of protest, voted to ask Vero for FPL rates. While that proposal appears unlikely to go anywhere, council members said it was intended to reflect the Town’s growing dissatisfaction with lack of progress in the five-year epic since FPL was invited to open up talks about purchasing Big Blue and the city’s electric system.