Not much expected from Friday electric talks
In the nearly five weeks since Vero Beach, Indian River Shores and Indian River County came together for a mandatory conflict resolution meeting, no one appears to have found the magic formula for settling the Shores’ lawsuit by getting Vero’s electric rates down to match Florida Power and Light.
Vero’s lead utilities attorney, Robert Scheffel “Schef” Wright, set the bar pretty low in an email last Thursday night to the legal teams invited to the second meeting this Friday.
“To avoid creating ambiguous or overly optimistic expectations, I want to say now that I do not know whether we will have anything definitive to report on September 26 regarding our efforts to renegotiate our 2008 Power Purchase Agreement with Orlando Utilities Commission,” Wright said.
As backup for the scheduled discussion on rates, Vero sent the County and the Shores a packet summarizing the city’s discussions to date on options aimed at reducing Vero’s rates.
Wright has stated that, if Vero can achieve all the things on the following list, he thinks the 30 percent rate disparity between the City and FPL can be cut by about half.
- Vero could decommission Big Blue, saving up to $4 million per year, but that would require the city to renegotiate its wholesale power agreement with OUC and to enter into yet another contract for peak-load power. This option could reduce rates by up to four percent, but it would also result in the loss of nearly 30 jobs. The city might also incur millions of dollars in costs for transmission upgrades to satisfy regulators’ concerns about the viability of the power grid.
- Vero could end the practice of transferring 6 percent of electric utility revenues into the city’s general fund. This option could reduce rates by about 6 percent, but without a major restructuring of city staff and services, would result in increased property taxes for city residents.
- Vero could retool its rate and fee structure, shifting part of the cost burden to new ratepayers in hook-up fees, to seasonal residents in a monthly accessibility fee, or to struggling residents in higher reconnect fees when service has been shut off for non-payment. Until the city completes a full-blown rate study later this year, it’s unknown what minimal effect these might have on rates.
- Vero could try to get better wholesale power rates from OUC to shave a few percentage points off its retail rates. To that end, “The City Manager and Utility Director have begun a dialogue with OUC that will include the future operation of the power plant or purchasing of capacity for fulfillment of contractual obligations,” the meeting backup materials state.
- Vero could exit its contract with OUC and pay up to $50 million in penalties due to an exit clause that 2007-2008 City Council members now say was inserted “to protect the city.” Critics call the $50 million penalty the “poison pill” meant to guarantee Vero would never be able to sell its utility to FPL. The net impact on rates of this option are unknown.
- Vero could opt to finance more capital expenses going forward instead of paying for the equipment in cash. This option could save some cash in the short-term, but is seen as merely a stop-gap measure that would catch up to the city later. This approach, by the way, is exactly how the Florida Municipal Power Agency ended up underwater in so many of its power generation investments, by financing and frequently refinancing its $2.6 billion in debt.
- Vero could continue to look for efficiencies in its operations, to trim the budget and to reduce personnel costs through attrition. The savings that could be achieved through these measures are unknown.
The parties were scheduled to meet at 9 a.m. Friday at the Indian River Shores Community Center next to Town Hall on Fred Tuerk Drive. The meeting is open to the public.
If the Shores, Vero and the County follow the plan they laid out in August, the next meeting will cover some alternatives for establishing a utility authority that would have actual management powers and would fairly represent the 61 percent of the ratepayers who live outside the city limits.
Should all this not produce a settlement, the Shores and Vero would go into formal mediation. The Shores Town Council has told its legal team it wants the whole process concluded by the end of 2014. After that, if there is no resolution, the lawsuit would go forward in the 19th Circuit Court.