VERO BEACH — When budget materials were printed last week for this week’s workshops, department heads at the City of Vero Beach must have known an electric rate hike was coming because they budgeted for it.
The Vero Beach City Council and the city’s ratepayers just found out Thursday, however, from Customer Service Manager John Lee that rates would go up 10 percent now and probably another five percent or more in the fall.
Lee said the cost per megawatt hour of electricity the city buys from the Orlando Utilities Commission has spiked over the past few months.
In January 2010 the cost of wholesale power to Vero, according to Lee, was projected to be $37.99 per megawatt hour and the actual cost came in just under that at $37.59. This spring, that cost went up to $44.59 and his projected to stay at $44.01 through 2012.
“We weren’t supposed to reach $44 until 2016,” Lee said.
Despite requests to explain the increased costs, Lee said the OUC has still not given him any details about what’s costing so much more to produce or deliver the power.
Last month, Vero imposed a 3.5 percent rate increase, which applied to all meter readings taken on or after July 1.
There was no discussion about the rate hike during a hearing of the electric utility budget on Thursday, as the rate will go up whether the elected leaders like it or not. The Vero Beach City Council is not required to vote to raise rates on city electric customers, as the staff is empowered to decide how much Vero needs to collect to recoup its costs.
The city is in the process of opening negotiations to sell the utility to Florida Power and Light, which is a regulated, investor-owned utility.
FPL’s rates are frozen through 2012. When FPL wants a rate increase, it must present a rate case before the Florida Public Service Commission in a process which can take many months or more than a year to complete. Recently, FPL petitioned the PSC for an 18 percent increase and the company was approved for less than four percent of that requested amount. That brings FPL rates to $94.22 for 1,000 kilowatt hours.
Currently, the city’s rate of $113.14 for 1,000 kilowatt hours is 20 percent higher than Florida Power and Light’s rate for the same amount of power.
With the 10 percent increase, Vero customers will be paying 32 percent more than FPL at $124.45 for 1,000 kilowatt hours.
Should the final five percent increase be necessary in the fall, Vero rates will be a full 38 percent higher than FPL at $130.11 for 1,000 kilowatt hours.
At that point, rates will be roughly $5 higher for 1,000 kilowatt hours than in January 2010 when OUC took over as the city’s wholesale power provider.
The increase the average Vero household using 2,500 kilowatt hours will see in its bill will be about $30 to $35 per month under the higher rate after both increases are phased in later this year.
Electric customers who were on the Vero Beach system may remember the summer and fall of 2009 when rates spiked to a full 58 percent higher than FPL. That was blamed on the Florida Municipal Power Agency and high fuel costs built into a “bad deal” with the power cooperative.
City officials spent about $3 million to get Vero out of that FMPA deal and into a 20-year, $2 billion contract with the OUC, which was billed as a “good deal” and a panacea for the city’s historically high electric rates, as compared to FPL.
At the time, city officials told ratepayers they would soon experience rates equal to or less than FPL while on the contract with OUC.
The Vero Beach City Council will resume budget workshops at 9 a.m. Friday. Today is the wrap-up day when decisions will be made about cuts in the police and recration budgets. The meeting will be held at Vero Beach City Hall in the council chambers and will be televised on Channel 13 and on live-stream internet video at www.covb.org.