City advisory commissions hand the utility ball off to City Council

By Lisa Zahner

VERO BEACH — Faced with long-overdue adjustments to electric, water and sewer rate structures, a joint session of the City of Vero Beach Finance and Utilities advisory commissions voted Thursday to accept a consultant’s recommended changes to base rates and usage rates for all utilities customers.

Under the recommendations, electric base rates would go up 7.8 percent overall in January, but bills should go down an estimated 15 to 20 percent, assuming a $13 million reduction in the cost of the fuels used to generate electricity, the consultants said. The 10 percent out-of-city surcharge would be eliminated, so County residents who live in small homes would see their bills go down about 25 percent, if the cheaper fuel costs come.

The rate design proposed by the consultant offered the biggest reductions to customers who use less than 1,000 kilowatt hours of electricity a month — a category that it said covered about 65 percent of the residential customers.  These would for the most part be people who live in very small houses or modest sized apartments and condos.

A customer using 1,000 kilowatt hours now pays about $159, but would pay about $125 per month under the new, proposed rates. This is $20 more than a Florida Power and Light customer currently pays for the same amount of power. The proposed rate structure would provide for higher usage rates for customers consuming more than 1,000 kWh per month.

Customers who live in larger homes, and use more than 2,500 kilowatts of electricity a month, would see less benefit from the new rate structure.

“The process of figuring revenue requirements and cost of service is fairly scientific, but rate design is more of an art,” said R.B. Sloan, director of the electric utility. “What you’re seeing here is an FPL designed rate, we wanted to be apples to apples with them. We are largely trying to track that benchmark that everybody wants to throw in front of us and that’s what you’re seeing.”

Sloan noted that FPL has requested a 31 percent increase in rates and that may effect the comparability of the proposed City rates. The FPL case is scheduled to be heard by the Florida Public Service Commission in late August.

The City’s rate recommendations will now go to public hearings before the Vero Beach City Council.

Should the Council accept the recommendations, water rates will rise by 7.5 percent and wastewater (sewer) rates will soar by 29.5 percent.

“If you had made incremental increases and amortized it over time, there would not have to be such significant increases,” said consultant Henry Thomas of Public Resources Management Group, who did the rate study, the first one completed for the City in 18 years.

“If you don’t do this, it could affect the credit rating and ultimately the ability to operate independently,” Thomas said. “You really don’t have a lot of cash reserve in the electric system, so there’s no way to phase in these increases.”

These adjustments will help balance the books to cover the budget of the water and sewer system, which is based on 80 percent fixed costs and only 20 percent costs that are tied to usage of the system. Currently, the electric utility is at or very near a zero cash balance and the water and sewer utilities are running in the red and borrowing money from other funds in the City.

The rate increases will also help the City continue to subsidize property taxes for City residents with nearly $8 million in funds collected from electric, water and sewer utility customers, more than half of whom live outside the City.

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