Vero Utility Advisory Commission finally hears electric financial model

VERO BEACH — The City of Vero Utility Advisory Commission Tuesday was virtually the last relevant group to consider the data presented in Dr. Stephen Faherty and CPA Glenn Heran’s electric utilty model.

The model illustrates in numbers the financial implications of the city obtaining various dollar amounts in proceeds for the sale of parts or all of the electric utility. It shows how bonds could be paid off and excess cash could be invested for an annual income stream to offset the loss of approximately $7.5 million which is now transferred — either directly or indirectly — into the general fund from electric bill revenue.

The bottom line of the model hinges upon obtaining substantially lower rates from FPL that would more than offset any needed increase in City of Vero Beach property taxes, which amount to about one tenth of city taxpayers’ annual tax bills.

“I don’t think there would be any problem bringing this thing to a head if we could get FPL to finish their part of it,” Chairman Lee Everett said, referring to the fact that FPL has said they are still in the analysis phase of investigating a potential purchase of the city’s system.

To date, they have not issued assurances about city ratepayers getting low FPL retail rates.

The volunteer board, whose job it is to advise the City Council on all matters related to utilities, saw the multi-page interactive spreadsheet months after the Board of County Commissioners, the now-defunct county Utility Advisory Committee, the Indian River County School Board and weeks after the Vero Beach City Council.

Councilman Brian Heady had tried repeatedly to get the model presented to the City Council and to the UAC, but it took several tries before the City Council acquiesced and allowed the latest version of the model to be heard in full.

“It was very anticlimactic,” Heran said after the presentation, a point that was emphasized by former Vero Mayor Warren Winchester, who said he had seen the presentation four times at various meetings.

“You seem to still be presenting your presentation like you’re fighting uphill,” Winchester said. “But it seems like you’ve achieved what you set out to achieve.”

He detailed the fact that the public is more educated about the issue now, that the council is open to considering a sale and that the city made known its willingness to sell, which resulted in bringing FPL to the table after former City Councilman Charlie Wilson invited FPL executives to a council meeting in November 2009 to talk about the possibility.

Winchester made two suggestions for Heran and Faherty to incorporate into the model.

One would be to investigate the cost of keeping the power plant to meet peak load and to fulfill contractural agreements, but upgrading it with more efficient generating units.

The other suggestion would be to include the cost of decommissioning the power plant in the event FPL wants all the other assets but not the physical plant itself.

Heran and Faherty said they would work on getting those variables plugged into the model and said the only other similar decommissioning they could find cost $600,000 for a site that had no environmental contamination.

“And we have a report here from John Lee stating that there is no contamination at the plant,” Faherty said.

Chairman Lee Everett, a retired electric utility executive from the Philadelphia area, reminded the committee and the public that the power plant, under the current legal entanglements with various agencies, is fulfilling a “valid purpose” and that the prospect of tearing it down should not be taken lightly.

Though Everett praised the utility activists for their time and diligence, Everett and the other committee members apparently do not understand that the model was intended to be used in conjunction with any offer that might come from Florida Power and Light, not instead of a bona fide offer on the table.

“It is just that, a model, and at some point we’re going to have some hard and fast numbers from FPL,” said acting Electric Utility Director John Lee. “What I see here is a beautiful sea of numbers and the numbers work, but it is a model.”

Lee has discounted the model because he asserts it does not use what he considers to be “real” numbers.

“I still don’t think they get it that the model is really just a roadmap for where you want to go,” Heran said. “They could use the model to determine at what price they might sell to FPL and at what point are the constituents better off.”

Heran and Faherty have been criticized for including a worst-case scenario in the model of giving away the whole electric system. Heran explained to the UAC that the price paid by FPL would have to be more than zero due to Florida Public Service Commission regulation, but that showing that the community as a whole would be many millions of dollars better off with a price of zero was designed to serve as a baseline.

“The price of zero is in there to take the fear away over selling the utility,” Heran said. “Then all they have to do is to negotiate the best deal possible with FPL and go from there.”

The point, Everett and other members of the committee reminded the public, is that FPL has yet to come to the point where they want to negotiate a deal.

“I’ll tell you what I’d like you to do is to get FMPA, I mean FPL, to say they like these numbers,” Everett said.

“FPL has said they did not find any problems with the model,” Faherty responded, explaining that he and Heran, accompanied by John Lee as an observer, traveled to Juno Beach recently to show FPL executives the model and to answer questions.

“Well, eventually we have to have FPL’s agreement on what the numbers are, and they (the City Council) also need advice from somebody as bright as you two guys and that costs money,” Everett said.

Everett added that until FPL indicates that it is definitely in the market to buy the Vero Electric Utility and comes up with an offer.

“We just have a study group,” he said.

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