Electric deal approved by Vero Council
After 15 months of negotiations, the Dick Winger-led City Council secured its place in Vero Beach infamy this week by approving, on a 4-to-1 vote, a bulk power contract with the Orlando Utilities Commission that rivals the terrible deal the Tom White-led City Council locked Vero into seven years ago.
The best thing to be said for this agreement is that it's shorter.
In return for the ability to reduce a typical 1,000 kilowatt hour Vero electric bill a trifling $2.50 a month in the near term, the City of Vero Beach not only gave OUC assets worth millions but actually agreed to further limitations on how it runs the Vero electric utility between now and 2023.
Councilwoman Pilar Turner, the only Council member to vote against the new agreement, said “the contract before us has the most onerous provision with regard to litigation that I’ve ever seen.”
The clause, inserted by Vero’s own attorney, would require the city to exhaust all legal remedies should a law, regulatory action or court ruling alter Vero electric’s customer base.
“They’ve done a wonderful job of protecting Orlando Utilities,” Turner said. “However, I see no such protection for the City of Vero Beach ratepayers.”
The insertion of the clause reminded many of the way Vero – not OUC – wrote a provision into the 2008 deal that would force Vero to pay a $50 million penalty to exit the contract. That $50 million penalty, by the way, was left in the new contract by Vero’s attorneys despite the fact that the total scope of the new deal is less than half the original.
In signing the 2008 deal, White and his fellow council members promised the agreement would usher in rates equal to or lower than Florida Power and Light after the contract took effect in January 2010. Today, Vero’s rates are more than 30 percent higher than FPL’s rates.
The process of re-negotiating the 2008 deal began in the summer of 2014 after the Town of Indian River Shores sued Vero citing unreasonable rates. When Vero and the Shores entered into a state-mandated conflict resolution process, the idea of amending the OUC deal was held out as Vero’s best rate reduction opportunity.
Attorney Robert Scheffel “Schef” Wright estimated at the time that a re-do of the OUC deal would “cut the rate disparity in half” – or by an estimated 15 percent. What actually materialized a little over a year later is a savings of around 2 percent to the average customer.
City Manager Jim O’Connor said he expects to be able to pass along the savings starting in December. For the average island customer who uses 2,500 kilowatt hours, that savings could be just upwards of $6 per month.
In exchange for the nominal rate reduction and the shortened term, Vero gave up what some would describe as a lot. OUC gets Vero’s gas transmission rights, which will allow OUC to run gas for about 72 cents as opposed to the market price of around $1.15 for the same volume of gas.
The value of those contracts was estimated to be anywhere from insignificant to $10 million. When a city advisory commission member found records of a recent sale of similar gas transmission rights that netted $43 million, that valuation was challenged.
The city’s all-volunteer Finance and Utilities Commissions, which met twice last week, did their best to vet the new contract, but were rebuffed in their efforts to get to the bottom of some of the financial assumptions that underlay valuations.
When they asked to be given the Excel spreadsheets used to come up with the numbers, another of Vero’s consultants, Bill Herrington, claimed the relevant formulas were “trade secrets” and said city leaders could only look at the spreadsheets if they signed a six-page non-disclosure agreement which contained threats of liability and litigation.
The volunteers refused to sign, and therefore were forced to proceed without the knowledge of what assumptions the consultant’s recommendations were based upon.
This issue prompted Indian River Shores’ representative on the Utilities Commission, Bob Auwaerter, and City Council candidate Laura Moss to not only protest, but also to vote against the contract when the roll call came up at their meeting.
Vero also gave up the right to settle or mitigate any of the current legal battles it currently faces.
Vero is currently at war with Indian River Shores in Circuit court, and with the Indian River Board of County Commissioners in a Florida Supreme Court appeal of a Florida Public Service Commission decision affirming what Vero claims is its right to permanently serve the 61 percent of its customers who live outside the city limits, in the Shores and in the unincorporated county including South Beach.
The new contract requires the city to litigate any such challenges, to the highest appeals court available.
After the vote, the council moved to the matter of shuttering the old power plant and asked City Manager O'Connor to come back with a detailed plan for doing so.
O'Connor has stated that Big Blue has fewer than the required number of employees, and said the city either must shut it down come Dec. 1 or hire additional employees.
As for the 22 employees who still work at the plant, O’Connor was asked to come back with cost estimates with regard to payouts of banked sick and vacation time, plus pension costs and other post-employment benefits such as healthcare.