FP&L, utility activists discuss financial implications of Vero Electric’s sale

VERO BEACH — Florida Power & Light officials for the first time saw the financial model of a potential sale of the Vero Beach electric utility put together by community activists Dr. Stephen Faherty and accountant Glenn Heran.

Acting Electric Utility Director John Lee also attended the presentation, conducted at Florida Power & Light’s offices in Juno Beach. Lee rode with Heran and Faherty to save the city the expense of travel. “We didn’t want to do anything behind the city’s back, and we didn’t want anyone to think that we were going down there to try to negotiate a deal or anything on our own.” Heran said. “We just wanted to show them the model. And we didn’t want anyone to say that the trip cost the city anything, so Steve drove and John rode with us.”

The purpose of the visit was to present a financial model Heran has developed to FPL officials. The Vero Beach City Council has seen abbreviated versions of the model, but has resisted attempts by Councilman Brian Heady to present the interactive spreadsheet at length during a public meeting.

The model lays out various scenarios for selling the electric utility to FPL and it has been widely panned by the city.

Heran said he’d never shown the entire presentation to a member of the city staff before.

“It’s an impressive Excel spreadsheet,” Lee said of the financial model, adding that he and the FPL officials “listened politely” to the presentation.

“I’ve seen parts and pieces” of the presentation, he said, adding, “None was a surprise to me.”

Heran and Faherty have shown the model to top-ranking county staff and both individually and as a group to all five members of the Board of County Commissioners.

“We asked the FPL folks if they could find anything in the model that was inherently incorrect,” Heran said. “And they couldn’t find anything.”

While a Florida Power & Light official did not say what the company thought of the presentation, spokeswoman Jackie Anderson said the power provider “has not made a decision regarding a possible purchase of the City of Vero Beach’s electric system, but we continue to conduct our analysis.”

Anderson said that the FPL officials who sat in on the presentation appreciated Heran, Faherty and Lee’s time.

“Any possible utility system purchase is a complex undertaking that requires careful consideration and we want to make sure that what we do is right for our customers and for the people of Vero Beach,” Anderson said.

As for the financial model itself, Lee said, “Mathematically, it works,” but it’s not perfect.

Lee said that the one problem he had with the presentation was the use of “will” instead of “may.”

He explained that Heran and Faherty told FPL officials that Indian River County and Indian River Shores residents on Vero Beach electric will leave the city’s power grid, when that is not a known fact.

Also, Heran and Faherty said FP&L will not include a surcharge as part of the potential purchase offer – FPL has made no such commitment, Lee said.

The model takes into account what the city might receive as a sale price for the electric utility, how that money could be invested, how it might affect property taxes assessed by the city and how — both for the individual and for the city and the county as a whole — the net effect of not owning the utility but having FPL rates would result in huge savings.

Currently FPL rates are about 32 percent lower than rates paid by the City of Vero Beach Electric customers for the same power.

The aggregate savings for Indian River County, Heran has estimated, would be somewhere between $18 million and $28 million per year, depending on the sale price the city could get for the utility and the right to service its 34,000 customers.

The interactive part of the model allows the user to plug in different hypothetical numbers for a sale price and see the results.

The utility has not been formally appraised, but city officials have estimated its value as being $150 to $400 million, depending on what is encompassed in that package.

City Manager Jim Gabbard has estimated that the undergrounding of utilities that was done for barrier island residents is worth $100 million.

Heran said that “any number greater than zero,” with regard to the sale price, would result in a positive effect for both the city and its residents.

He added that the city should, and believes would, get a fair price from FPL for the utility.

Having seen the presentation, Lee said he does not plan to recommend to the Vero Beach City Council they receive the same.

“The deal is between FPL and the city,” Lee said. “It’s not a model anymore.”

The two entities have to look at real numbers without assumptions built in and take into considerations that are outside the scope of financials.

“That’s just good business,” he said.

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