Vero Beach will be tied to FMPA power contracts until 2043

VERO BEACH — In 2009, as electric bills skyrocketed, the City of Vero Beach clung to the mantra that once it got out of the Florida Municipal Power Agency contract on Jan. 1, the city would be finished with the cooperative for good.

Except it isn’t finished with the cooperative for good, even though the city is now under a new contract with the Orlando Utilities Commission.

As a result of the contract through FMPA for power from the St. Lucie 2 nuclear plant, the city will have to buy enough power from this nuclear plant to supply about 3,000 Vero Beach homes every day until 2043. The city also, as a result of long-term contracts entered into with FMPA, will have to buy power from the Stanton 1 and Stanton 2 coal plants for the life of these plants. Those two facilities that are majority owned by the city’s current power supplier – the Orlando Utilities Commission.

Vero Beach 32963, our sister publication, has learned the city still buys about one third of its normal daily power needs through these FMPA contracts, and it might never get out of all of its responsibilities. When these plants live out their usefulness, Vero will also have to pay a portion of the cost of decommissioning them.

These findings come as FPL begins the task of putting a value to the city’s utility operations in trying to get a handle on what Vero owns, owes or has a stake in as part of the assets of the electric utility. FPL has undertaken the project as an initial step in determining if it wants to consider taking over supplying power to Vero Electric customers.

The city has repeatedly said it doesn’t have figures for stakes in power it receives from the three power plants because it accepted, under FMPA agreements, to back a portion of some $500 million in outstanding bonds used to purchase FMPA’s assets in those plants.

Mark McCain, FMPA spokesman, laid it out this way: Prior to Jan. 1, Vero Beach was a member of four power projects with FMPA. The St. Lucie Project (St. Lucie 2 nuclear plant), the Stanton I and Stanton II projects (Stanton 1 and 2 plants), and the All Requirements Project.

As such, the city was permitted to reduce its wholesale purchase of power from the All Requirements Project to zero after much negotiation, $3 million in consultant fees and five years’ notice, but Vero is still on the hook for St. Lucie, Stanton I and Stanton II and some percentage of the $500 million dollars of still outstanding bonds used to purchase FMPA’s stake in those plants.

FMPA, a not-for-profit corporation, floated bonds to purchase a percentage interest in the power plants. Members signed contracts to be part of the deal. The City of Vero Beach, as a member, is entitled (and required) to purchase a total of 49 megawatts of power every hour (MWH) from the three plants.

Forty-nine MWH per day, given the Vero Beach utility’s estimate that the typical residential customer uses less than 1,000 kilowatt hours per month, would supply the needs of almost 15,000 local customers. The price for that power is determined by the costs of running the plant.

Whatever it costs to run the plant, FMPA gets billed its percentage of that — for example 8.8 percent of operational costs of the St. Lucie nuclear plant — and those costs are then assessed to Vero Beach and the other members of that project as the charge for the power.

“It’s a take or pay contract. Even if you don’t take the power, you have to pay for the costs,” McCain said. “The good news is that this is very cost-effective power production.”

The wholesale electricity the city buys from OUC under the new contract is in addition to that power the city is already entitled to via agreements brokered through FMPA. The OUC power replaces the power the city used to purchase from the FMPA All Requirements Project.

The city also doesn’t know what its potential bond obligations are in relation to the money which purchased these assets, whether they are paid off or whether it could pay off that debt service early to completely extricate the city from FMPA.

According to McCain, the answer to that is that the city’s monthly obligation would be reduced — just like the day that old car gets paid off — but that Vero would still have to pay for the cost of operating the paid-off plant.

On top of the operational costs, FMPA and its members were obligated to pay down the $632 million in bonds it issued to purchase the share of the plants. About $126 million has already been retired, with $506 million left to pay off.

As a participant in those contracts, Vero Beach is required to pay off its portion of that debt. Vero is still a full, voting member of the FMPA. Should the city be allowed to sell or assign its purchase rights to the 49 megawatts of power, it still doesn’t completely sever the relationship with FMPA.

The city could choose to sell or assign its rights to another municipality, but if that municipality defaults on the contract, Vero Beach would still be on the hook.

But for how long would the city be on the hook?

“The term of the contract for the project is for the life of the power plant,” McCain said.

The St. Lucie 2 nuclear plant is licensed by the federal government and recently got a 20-year extension to operate until 2043. The coal-fired Stanton 1 and 2 plants are not assigned a particular licensing lifespan.

With adequate repair and renewal efforts — becoming increasingly expensive with age, akin to keeping an old car running — a coal-fired plant could, theoretically, be maintained indefinitely.

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