Vote for sale of Vero electric likely to bring rate cuts later than hoped
STORY
Vero Beach voters will be asked in less than two months to make a choice on one of the most important issues in years: Should the city sell its electric utility system to Florida Power & Light. If the deal goes through, the customers of Vero electric are expected see their rates drop 30 to 40 percent.
If voters go to the polls March 12 with their pocketbooks in mind – and if the November 2011 referendum that approved leasing the power plant site to FPL is any indication as to how most voters feel – approval of the sale is likely.
Still, if barrier island residents – including those in south county and most of Indian River Shores who have subsidized Vero city budgets for years through their high electric bills – think the decision is going to pave the way for a quick sale of the utility, they may be in for a rude surprise.
A target date of January 2014 for conclusion of the sale to FP&L could be a very tough deadline to meet. Instead, Oct. 1, 2016,, might be more realistic.
"That's my nightmare," Mayor Craig Fletcher told a group from the Indian River County Democratic Club over the weekend. "It scares me to death. I stay up nights (after) dreaming about having to wait three years. But no one said it is going to be fair."
The possible delay stems from the fact that sale requires a variety of approvals ranging from municipal electric agencies to state and federal utility regulators.
Perhaps the toughest sell will be the Florida Municipal Power Agency.
Vero is one of 31 municipal utilities that make up the FMPA, a wholesale power group. The city needs the FMPA's blessing in a number of areas before the sale can be consumated.
For starters, the FMPA must sign off on the already negotiated $54 million deal between the city, FP&L and Orlando Utility Commission which turns over power entitlements and gets the city out of its current obligations as it relates to three power systems.
Because Orlando has a good credit rating, this part of the deal is likely workable, said Mark McCain, a FMPA spokesman. Still, some questions regarding tax laws need to be answered because a public utility, Orlando, would then be entering into an agreement with the private entity, FPL.
Attorneys representing the city will meet with FMPA attorneys this week to sort out that issue and other loose ends, said City Manager Jim O'Connor.
Then, there is the FMPA's All Requirements Project.
Vero is one of 15 municipalities in the largest of all FMPA power projects. It has been some years since the city has purchased any power under this agreement, but extricating the city from some residual requirements could prove a tough battle.
The city’s transactional attorney missed an earlier deadline to escape from some of these obligations, but McCain said it’s unlikely that Vero could have been totally out of its FMPA obligations earlier than September 2015 anyway.
The city isn't willing to roll over just yet on its escape from FMPA, although a telling aspect of the FPL agreement is it allows delay of the sale’s completion until Dec. 31, 2016.
"The transaction could close we think in 2014," John Igoe, the Palm Beach attorney representing the city in the sale, told the City Council when he briefed members last week on the 327-page purchase and sale agreement.
"The FMPA is owned by the cities we serve," said McCain. "We are here to serve the desire of our member cities. We have to follow the contract.
"Those contracts are the underpinning for more than a billion dollars in assets, and there are significant agreements you have to follow. When you start varying from the terms of the contract, it becomes difficult because there are a number of people involved."
Other potential entanglements ranging from breaches of contract to catastrophes are outlined in the massive sales agreement between the city and FP&L.
The agreement and other documents recently given to the city council outline the tentative deal worth about $177 million – about $2 million less than anticipated – and spell out what assets FP&L will take ownership of if the deal is inked.
City council members are expected to vote on the agreement next month.
Before they do, details of the agreement will be discussed by the city's utility commission Jan. 29.
On Jan. 31, the city's finance department also will discuss the deal as well as present the city with ways to balance its budget and survive without the millions of dollars from the city's electric system that currently is funneled into the city budget.
Should the sale go through, the city is expected to experience a budget shortfall of more than $3 million annually.
Prior to a Feb. 19 vote by city council, council members will meet Feb. 12 for a workshop to review the utility and finance board's recommendations and findings.
In the end, Fletcher thinks the deal will go through.
"This is going to be huge," he said. "It's a first of its kind. We are setting a precedent here in many phases."
