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Shores suit against Vero seen headed for Supreme Court


Much remains uncertain as the Town of Indian River Shores and the City of Vero Beach wait to hear how Judge Cynthia Cox will rule on a motion to dismiss the Vero electric lawsuit, but what both sides now know for sure is it will be years of litigation before any answer is final.

With Vero’s 34,000 electric customers and just about every utility in the state of Florida waiting for the outcome of this case, Cox acknowledged last week that whatever is decided by her or by a jury will end up being challenged. 

“I think the (Florida) Supreme Court would ultimately decide, because it would not stop here,” Cox said during the nearly two-hour hearing on Aug. 26. The hearing was supposed to be held Sept. 18, but it was moved up because a slot opened up on Cox’s docket.

But the earlier hearing turned out to be a classic case of hurry-up-and-wait.

Cox told those who arrived pumped with anticipation that she’s currently drafting opinions on hearings held in March and hopes to work her way up to April’s hearings soon.

The Vero electric case will now remain on hold for two to six months while Cox carefully considers the arguments and the case law presented to her by Vero, by the Shores and by the Florida Public Service Commission – the behemoth Tallahassee-based regulatory agency which inserted itself into the dispute to protect its own bureaucratic turf.

With four counts in the lawsuit, possible outcomes range from a decision to proceed to trial with all four counts, to a dismissal with prejudice of all four counts, and numerous iterations in between.

The first count of the suit asks the court to issue a declaratory statement clarifying what powers the Shores has, as a sovereign municipality, after its franchise agreement with Vero for electric utility service expires on Nov. 6, 2016.

The Shores is hoping to have its municipal powers affirmed, and then to petition to have Vero’s electric territory redrawn based upon the court ruling. Vero is hoping to prevail and keep all 34,000 of the customers in its system.

Three other counts deal with matters of anticipatory breach of contract, breach of contract and damages for those breaches, which include an allegation that Vero has mismanaged its electric utility, resulting in unreasonably high rates.

The Shores could be encouraged to rework its already amended complaint. Proceedings could easily extend past the termination of the Shores’ franchise agreement on Nov. 6, 2016. In general, any delay is good for Vero because it preserves the status quo. Every month the suit meanders on, Vero will continue charging Shores customers rates up to 40 percent higher than Florida Power and Light.

For Vero, this case is about protecting what it claims is a permanent electric service territory granted by the PSC.  That territory forms the backbone of Vero electric’s business plan, which skims about $8 million in direct and administrative transfers into the general fund to pay for city services and city hall staff.

For the Shores, this case is not about Vero’s territory, but about the Town’s powers under Florida law as a sovereign municipality to control its public rights away and its power to enter into franchise agreements. It’s also about Vero’s responsibilities to prudently manage its utility and to charge reasonable rates under the Town’s current 30-year franchise agreement with Vero.

For the PSC, this case and whether or not it goes forward or winds up back in the five-member board’s lap in Tallahassee, is about defending the Commission’s “exclusive and superior” power over electric utility territories.

There’s too much at stake for either Vero or the Shores to accept a local verdict that doesn’t go the way they want it to.

With $2 million each year paid to Vero by the 80 percent of Shores residents who live in the south end of the Town in rates higher than those Florida Power and Light charges the 20 percent of Shores residents in the north end of Town, Shores leaders seem prepared to hang in there for the long haul, despite costly legal fees.

Vero’s attorney, Robert Scheffel “Schef” Wright, has said over and over again that rates are irrelevant to the Shores case against Vero. In his litany of defense arguments last week, he made a statement that was nothing less than a head-scratcher.

Wright said the Shores “never complained about our rates until sometime after the turn of this century.”

So, in other words, only for roughly half the 30-year franchise agreement in question. But when you put it in terms of centuries, 10 or 15 years of punishing rates sounds like such a small thing. Also, Wright must have forgotten that Vero tried to sell its utility to FPL in the late 1970s because of high rates.

Fast-forward nearly 40 years to the collapse of Vero’s most recent effort to sell its electric system to FPL, which led the Shores to what officials say is a last resort in court.

Running parallel to this Circuit Court suit is a related Indian River Board of County Commissioners appeal to the Florida Supreme Court of a February decision of the PSC and, more recently, an offer by FPL to purchase the 2,900 Shores customers and equipment from Vero for $13 million.

The County Commissioners might have a head start in getting some answers. The county’s legal team is plodding forward with a Florida Supreme Court appeal on behalf of South barrier island customers and mainland county customers of Vero electric who also no longer wish to be served by Vero when their franchise agreement expires four months after the Shores’ in March 2017.

Oral arguments in that case are scheduled for Dec. 10 in Tallahassee.