VERO BEACH — For the first time in 18 years, the City of Vero Beach is slated to raise base rates on electricity in an attempt to bolster the shaky financial state of the utility.Twice in the past few months, electric customers have seen their power cost adjustments soar. City officials say there will be no relief from those high bills, other than reduced usage when temperatures cool, until at least January. The utility started out the 2008-2009 fiscal year with $14.5 million in cash is now at a zero cash balance and trying to recoup those funds, according to Finance Director Steve Maillet.
At the urging of Director of Electric Utilities R.B. Sloan, who took over management of the utility in 2007, the city contracted with Public Resources Management Group (PRMG) of Maitland, Fla. to conduct a long-overdue study of electricity rates. Water and sewer rates were studied as well. Henry Thomas of PRMG reported back to a joint meeting of the city’s Utilities and Finance commissions on June 17 and then to the City Council at a special call meeting on June 22. Preliminary recommendations would raise the city’s electric base rates by 7.8 percent, but would do away with the 10% out-of-city surcharge that county residents now pay. The surcharge nets $3.3 million annually from county residents who have virtually no say in how the utility is run. The general fund takes $5.9 million from the utility and the city also charges the utility another $1.7 to pay for personnel and payroll services, for a total of $7.6 million drained from the electric fund each year. The money pumped into the City from the electric utility helps subsidize the low 1.94 milliage rate on real property within the city limits. In fact, it tops the $5 million raised annually through ad valorem taxes.Commissioner Bob Solari, who represents the disenfranchised communities in the South Beach who get their electric from the City, said the whole utility situation – encompassing electric, water and sewer – is pricing businesses out of the city as they’re often paying 30 to 40 percent more for utilities than the competing shop down the street. But he is not hopeful that any serious headway will be made by the City Council, as he served on it from 2005 to 2007 and knows the way the utility operates.”There are two business models for a utility, the first is meant to serve the utility customers and the second is meant to provide revenue for the general fund,” he said. “And as long as the business model is to provide revenue for the general fund, they’re not going to change the way they do business.”Should the City Council insist on continuing to raid the utility’s coffers, there seems to not be much of a choice but to raise electric rates, as revenue projections under current rates fall short of meeting expenses.”The electric services you provide are not going to be viable without a rate adjustment,” Thomas told the Council members. “The projected deficit for 2010 is $5.3 million.”For the balance of the calendar year, residents will be under the existing rates, topped off by the most recent hike in power cost adjustment, which will pay the City’s share of a $1 million assessment from FMPA. The new rates would go into effect in January, after the City switches its power supplier from the Florida Metropolitan Power Agency to the Orlando Utilities Commission. The new contract with OUC, according to city officials, would allow the city to access power at cheaper rates and would allow the flexibility of purchasing power produced by coal when the cost of natural gas go too high. Under the current arrangement with FMPA, City electric customers are completely at the mercy of volatile natural gas prices, which are passed on through power costs adjustments on monthly bills. The City has only passed along about 50 percent of these adjustments, the rest have been absorbed by the utility when there were cash reserves to absorb.The direction the City will take remains unclear, but a joint meeting of the Finance and Utilities Commission meets at 10 a.m. Tuesday and while the results of the rate study are not officially on the agenda, they may be discussed, as it is a public meeting and council members have asked for a recommendation from committee members on this issue. Whatever the decision, it will affect a great number of households and businesses – nearly 34,000 customers in all – with 60 percent of those residing outside the City of Vero Beach (50 percent in the county and 10 percent in Indian River Shores) and not represented by council members voting on the issue.PRMG will present a menu of rate adjustment options to the City Council at the end of July or the beginning of August and there will be an opportunity for public comment at that time. Agendas of regular city council, special call and committee meetings can be found at www.covb.org.