Hoping to move swiftly on the purchase of the 3,000 Indian River Shores electric customers now served by the City of Vero Beach electric system, Florida Power & Light delivered a 92-page letter of intent to Vero last week that outlines terms of the proposed deal.
The document was part of the backup material for consideration at this Tuesday’s City Council meeting, and was expected to be the topic of much debate and consternation by those opposed to selling off the Shores customers for $30 million cash.
FPL says it would need to purchase Vero’s transmission assets that carry power to residents and businesses in the Shores, and those assets need to be free and clear of liens and other encumbrances. It states that FPL will provide retail electric service to Shores customers and charge its existing rates, as approved and adjusted by state regulators.
In addition, the Shores Town Council last week affirmed its previous commitment for the 80 percent of town residents that would be switching from Vero electric to FPL to fund $3 million of the purchase price via a surcharge. FPL would collect $1 million per year for three years on electric bills. Shores residents in the north portion of the town already served by FPL would not pay the surcharge.
Under the terms of the deal, because it will take time to complete technical upgrades needed to fully integrate the Shores into its own distribution system and bring service in from the North Barrier Island, Vero would allow FPL to wheel power through Vero’s system for a few years.
Vero City Manager Jim O’Connor said on the eve of Tuesday’s meeting, “The letter said what we expected [it would say] and from the Administrative side, it is good enough to start discussions for the details of the transaction.”
The deal is contingent on the Florida Public Service Commission amending the service boundaries of FPL and Vero Beach electric, but this is not seen as a hurdle, as the Shores has petitioned to be carved out of Vero’s territory, and PSC Chair Julie Brown has openly encouraged the parties to come to terms and make a deal. The case was and is a political hot potato for the PSC, involving sticky constitutional questions and possible federal antitrust issues.
While the outright purchase of the Shores’ customers would not create any sort of precedent (except for the huge $10,000 per customer price tag!), a decision by the PSC, or by the Florida Supreme Court on appeal, that the Shores’ home-rule powers to grant or withhold permission for an electrical provider to operate could have proven problematic to municipal-owned and investor-owned utilities across the state of Florida.
The second section of FPL’s letter talks about the “due diligence” process that will precede the final deal FPL hashes out with Vero’s management staff and new transactional attorney.
The City Council voted 3-2 to fire utilities attorney Robert Scheffel “Schef” Wright last month over concerns that he would not be the best person to make the deal happen, since he’d advised strongly against the $30 million sale. The letter states FPL expects to execute the contract with Vero by March 1.
Following the main eight pages of the letter is a 2007 resolution concerning Vero’s revenue bond covenants, with lengthy attachments. At the time, Vero had $56 million in outstanding tax-free municipal bond debt on its electric utility. When the city gets its $30 million in proceeds from the partial sale, the City Council could opt to pay down the utility’s debt to reduce long-term operating expenses.
