VERO BEACH — A meeting of Florida Power and Light President Eric Silagy and Florida Municipal Power Agency CEO Nicholas Guarriello on Monday has resulted in a proposal that may hasten and simplify the sale of the Vero Beach electric utility to FPL.
Vero council members on Wednesday afternoon were forwarded a copy of a letter penned by Silagy on Tuesday summarizing the deal he and Guarriello hammered out. Negotiations on the sale had been bogged down for nearly a year with attorneys disagreeing on key points, legal bills mounting and no clear solution in sight.
Councilman Dick Winger, who provided VeroNews.com with a copy of the letter on Wednesday, said in an email: “Perhaps we finally have a path to get this sale done,” and noted that the parties will meet to discuss the proposal on Friday.
Councilwoman Pilar Turner confirmed Wednesday evening that she had been aware that Silagy was set to have a high-level meeting with the FMPA on Monday. Expressing that she was optimistic, Turner also said she thought recent political pressure put on the FMPA from various sources may have caused them to come to the negotiating table with FPL.
The first key point of the proposed deal relates to the cancellation of the City of Vero Beach’s long-term contracts with the FMPA and the assignment of Vero’s rights and responsibilities to Orlando Utilities Commission.
Currently, Vero Beach buys wholesale power from OUC and through the FMPA from OUC’s Stanton 1 and 2 coal plants and from FPL’s St. Lucie nuclear plant. To sell its utility, city leaders needed to extricate Vero from a contract with OUC which would have been in effect until 2030 and responsibilities to FMPA of 50 years or more through the decommissioning of the Stanton 1 and 2 and St. Lucie power plants. Without an electric utility, Vero would have no entity to accept and re-sell the power.
The previous agreement on the table temporarily transferred Vero’s power “entitlements” to FPL for three years and then ultimately to OUC. That arrangement had caused concern because the bonds used to build the FMPA power generation capacity were floated as municipal revenue bonds, which have a tax-exempt status. The direct transfer to OUC would avoid any tax issues or the need for the Internal Revenue Service to rule on the deal because OUC, like Vero electric, is a tax-exempt, municipal-owned utility.
The second key item offers FMPA an undetermined amount of cash in consideration for cancelling Vero’s long-term contracts and executing new contracts with OUC in Vero’s stead. Vero had been set to pay OUC $34 million to take its place in the power co-op, plus $20 million to exit the 20-year, $2 billion contract signed by Vero in 2007. FPL was to purchase wholesale power from OUC for three years as part of the consideration. It’s unclear where the previous agreements with OUC stand under this new plan to dispose of Vero’s power entitlements.
Possibly the most important element of the proposed agreement is listed as item 1(d), which amounts to a promise that FMPA will not only not try to obstruct the sale of Vero electric to FPL, but that FMPA will fully cooperate and even advocate for the closing to happen.
“FMPA would take all actions reasonably requested by COVB and FPL, including providing consents and approvals within its control and diligently pursuing consents and approvals of third parties, to facilitate FPL’s acquisition of the COVB electric utility in an expeditious (including accelerating COVB’s withdrawal from the All-Requirements project) and economic manner,” Silagy wrote.
Next, Silagy’s summary states that FPL will broker an agreement with FMPA for options for 100 megawatts of “potential participation” FPL’s Turkey Point Nuclear Plant, specifically from Units 6 and 7, which are slated to go online in 2018 and 2020, respectively.
Finally, the compromise also states that FPL will sell FMPA some transmission capacity that it needs from Southern Company’s transmission system sometime after Dec. 31, 2015.
The terms, Silagy wrote, are for “discussion purposes” and would be contingent upon a successful closing of the sale of Vero Beach electric to FPL. Silagy gave the FMPA a deadline of Sept. 20 to get back to FPL on the proposal.