Psst. Anyone want to buy $1.2 million worth of oil?
The City of Vero Beach, in its final settling up with the Florida Municipal Power Agency, has been handed a bill for $1.2 million for 28,440 barrels of fuel oil it may never use.
The oil, purchased at an average cost of about $43.50 per barrel, was what was held in the two big tanks behind the blue power plant as of midnight Dec. 31st, when the city's contract with FMPA expired and we switched power providers.
Although city officials were supposed to run down the inventory of oil prior to the end of the year to save money, the city continued purchasing thousands of barrels of oil in the months prior to the end of the contract even though it was using hardly any.
During October, the power plant used zero fuel oil. In November, it used 336 barrels. In December, it again used zero.
So why did the city keep accepting deliveries of fuel oil in 2009 when it knew it did not need it – might never, in fact, need it – but was going to have to pay for it come Jan. 1st.
Vero Beach 32963 has asked for the answer to that question and, as of press time, has received no response.
The only units at the plant which regularly run on fuel oil are Units 1, 3 and 4 and the city doesn't fire those up unless power requirements are surging to record levels during a heat wave or cold snap, or when technical problems elsewhere or a major disaster have interrupted the transmission of cheaper power.
Members of the city's Finance Committee during a Jan. 20 meeting said these outdated units are so expensive to run that the city unsuccessfully attempted in the 1980s to sell one or more of them to developing countries, and "we couldn't even give them away to Grenada."
Units 2 and 5 run on what is called a Combined Cycle, relatively efficiently use natural gas and captured steam power to produce electricity. The "CC," as those two are collectively called, get fired up first whenever the city needs to supplement the power we're getting from our provider and our assets in other plants.
If Vero Beach used an average of 336 barrels every month (as in November) going forward, the current inventory would last a full seven years!
The good news is that customers won't be charged a portion of the $1.2 million on your electric bill -- not right now, anyway. Those costs will be passed along as we use the oil in the form of monthly fuel cost adjustments, according to city Finance Director Steve Maillet:
Maillet also said the city will only have to pay FMPA about $320,000 out of its reserves, because the $1.2 million will be offset by some other good news.
The city is expecting an $880,000 refund from FMPA for some other issues related to the sunsetting of the contract. When and how will that money be returned to customers in the form of a credit or rebate?
"Staff is evaluating the best way to return this credit to COVB customers," Maillet said.
