FMPA leader finally appears before Tallahassee lawmakers
After being a no-show the first time that he was summoned before the Joint Legislative Auditing Committee to answer for a deeply problematic audit, Florida Municipal Power Agency CEO Nick Guarriello finally approached the lectern Monday offering up some humble pie to the group of Florida Senators and House members.
“First of all I’d like to apologize that I wasn’t here on March 30 at your last meeting,” Guarriello said.
The executive’s openness to the legislators’ grilling, the FMPA’s filing of timely progress reports every 60 days and, on paper at least, the FMPA’s statements that it has addressed two-thirds of the Florida Auditor General’s 15 major findings, bought Guarriello some goodwill with the legislators. They did not vote to automatically audit the FMPA this year, but instead to again look at the agency’s progress on fixing the problems when the joint committee convenes in November.
Vero Beach was one of the original members of the FMPA and the organization is seen to be the major, insurmountable stumbling block to Vero being able to sell its electric utility to Florida Power and Light. The FMPA’s hedging losses, the fact that it is hugely in debt and passes along high costs for wholesale power are a major factor in Vero’s electric rates being about 30 percent higher than FPL’s.
Among the questions posed to Guarriello was how an FMPA member city could get out of the statewide municipal power co-op, which has jokingly been referred to as the “Hotel California” because cities can never really leave. “Is there not a way to get out?” asked Indian River County’s legislator on the committee, Rep. Debbie Mayfield. “That’s a good question,” Guarriello responded.
Guarriello explained that there is a steep price to pay for exiting the co-op, because the remaining members must be made whole not only for picking up an extra share of operating costs, but for decades of possible expenses related to the repair and decommissioning of generating plants in Orlando, St. Lucie County and elsewhere.
When Vero asked for a pricetag to exit the FMPA for the purpose of selling Vero electric to FPL, Guarriello said the cost would have been $45 million or $52 million, depending upon the city’s exit strategy.
City Manager Jim O’Connor, when asked previously about those outlandish numbers, said it really doesn’t matter how much the FMPA wants for an exit price once the number rises above about $10 million, because Vero simply doesn’t have the cash to bail out. Neither do the other 30 member cities apparently, as they’re all stuck in the same boat.
One bit of progress was made, when Vice-Chair Rep. Dan Raulerson of Plant City honed in on something that Vero utility activists have been pushing for – a fair-market valuation of each member’s share in the co-op’s assets and liabilities. “Would it be appropriate to have some valuation of these assets?” Raulerson asked.
Guariello replied, not giving any detail about how or when the FMPA would comply, “We have no problem with doing that. If that’s something you want us to look at, we can do that.”
Raulerson also asked Guarriello if he thought some heightened state oversight of the FMPA’s operations would be in order, in light of the fact that its operations span multiple counties, and that it suffered huge losses of taxpayer and ratepayer money due to risky investment and hedging practices. The FMPA was created by an act of the Florida Legislature, chartering it as a state-sanctioned Joint Participation Agency. Guarriello danced around this question.
With regard to the hedging losses, Guarriello repeated the FMPA mantra that those bad decisions were a thing of the past. “I sort-of think that’s been beat up already,” he said.
Mayfield pointed out that customers outside the municipal limits of FMPA cities don’t have any representation, and that some state oversight such as investor-owned utility customers have with the Florida Public Service Commission might be appropriate.
Indian River County Attorney Dylan Reingold, who traveled to Tallahassee for the hearing with Commissioner Tim Zorc, also hammered on the need for someone to stick up for the outside customers, a sore issue in Vero with 61 percent of customers living outside the city and unable to vote for City Council candidates, and Vero at war in court with its outside customers in the County and in the Town of Indian River Shores.
Reingold said he’s not satisfied with “the lack of true reform” and the way the FMPA has checked off item after item on the auditors’ list of findings and recommendations by simply saying the co-op’s leadership has changed its internal policies for operation and investment.
For example, the FMPA lists that it has exited the Taylor Swaps debacle in which it hedged on interest rates and lost, but until Guarriello was questioned by audit committee members, he did not volunteer that it cost FMPA ratepayers $130 million in payments on new bond debt issued to cover the Taylor Swaps losses.
“I don’t see this as significant reform; it’s just another policy,” Reingold said. “It’s not that they didn’t have policies, it’s that they didn’t follow their own policies.”
The FMPA has five more findings of the auditors to address before year-end, and the board is using a management consultant to guide the FMPA through that process.