Vero News

Did the City of Vero Beach get the best deal possible for electric customers?

VERO BEACH – The city and its consultants have repeatedly said that secrecy in negotiating the upcoming power switch to the Orlando Utilities Commission was at the insistence of the OUC and that our negotiators got the best deal they could for Vero Beach.

However, in reporting that first appeared in our sister publication, Vero Beach 32963, it has since come out that when the City of St. Cloud negotiated a similar contract with the Orlando Utilities Commission a decade ago it not only got a much better deal, but the pact contained no $50 million exit penalty and was open to public scrutiny.

Compare that to the two years the ratepayers of the City of Vero Beach Utilities could not scrutinize the $2 billion electric contract with the Orlando Utilities Commission and were told nothing of a $50 million exit penalty. Among the questions this raises is:  Who worked out this deal and whose idea was it to keep Vero Beach utility customers and taxpayers in the dark?

St. Cloud officials have confirmed that the agreement between St. Cloud and its 22,500 customers and the OUC was not kept from the public for years and does not contain hefty exit penalties. Instead, the contract was made public when it came before the St. Cloud City Council for approval.

As for exit penalties, the contract contains a “specific performance” clause related to a breach by either party, and calls for a court to decide what is fair if a breach of contract occurs.  No penalty is pre-agreed if there is such a breach. The $50 miilion penalty to Vero Beach ratepayers effectively excludes the city from striking a better deal elsewhere during the 20-year life of the OUC contract.

Further, says Sandra Ramirez, St. Cloud’s public information officer, the city agreed to outsource its utility operations to the OUC.

OUC now handles all the maintenance, billing, collections, customer service, installations, repairs and metering. OUC took St. Cloud’s electric employees into its system, taking the responsibility for salaries, benefits and pensions off the City’s expenses. The City of St. Cloud had 85 employees at the time and no employees were left without a job after OUC took over management of the St. Cloud plant and utility.

“Eight employees worked at the power plant; the other employees were customer service and lines crews – but, yes, all employees were offered employment by OUC,” Ramirez stated in an email to 32963.

By comparison, the City of Vero Beach employs 113 people, a dozen of which work at the five-unit power plant. The St. Cloud plant, which is currently non-operational, has eight power generation units.

Each year, the City of St. Cloud receives “9.5 percent of the retail electric utility sales that is subject to gross receipt tax” according to the contract and Ramirez.  The contract states that this revenue to the city shall be a guaranteed minimum of $2,361,000 per year, paid in equal monthly installments.

Vero Beach takes some $5.9 million in direct transfers and $2.1 million in administrative fees annually into its general fund from the operation, although it costs $110,000 daily to run the utility.

City Councilman Charlie Wilson said he has asked city officials to provide him with records showing that as the contract was under negotiation, the city and its consultants researched comparable municipal utilities and their operations.

He has not received that information.

Vero Beach ratepayers learned after Sept. 30 the details of the $2 billion contract that is scheduled to run over 20 years, and includes the enormous exit penalty.  In the weeks that followed, only one sitting council member claimed to have read the actual document before voting to move forward on April 15, 2008.

The whole contract is now subject to a grand jury investigation.

Portions of the OUC contract that some members saw had been redacted, and then the document was sealed for two years.

City officials have offered a variety of explanations ranging from saying that the confidentiality was required by the bidders because they feared losing trade secrets, to saying it was required by the consultants.

In regard to the penalty, the city has said that it was mutually agreed upon – even though it is obvious that it had to have been proposed by one party or the other — and included in the contract to protect both parties. The $50 million penalty was redacted, city officials have said, as a trade secret.

The Vero Beach deal was brokered by three individuals doing the city’s bidding — former Electric Utility Director R.B. Sloan, consultant Sue Hersey and attorney Maebh Purcell.

Sloan resigned and left the city as of Nov. 6, and Hersey and Purcell are back in Boston. Hersey reportedly earned about $300 per hour plus expenses to work on behalf of the city, with the taxpayers also picking up the tab for numerous trips back and forth from Boston to Vero Beach.

“Not a soul who negotiated this is still here, but they were under the direction of the City Manager and were attested to by the City Attorney,” Wilson said.

The question remains whether or not, less than one month before the scheduled “turnover” date of January 1, the ratepayers of the City of Vero Beach Electric have any options.

Voters have already ousted two incumbent City Council members and there are rumblings that a suit may be filed by a concerned citizen to challenge the contract. Should there be pending litigation on January 1, it could throw a wrench in the transition to the new power provider.What do you think? Did the City of Vero Beach get the best deal it could for its ratepayers? Would you have voted for the OUC contract if you were on the city council? Share your thoughts in the comments section below.

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