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Can Vero actually divide its electric customers with FPL?

STORY BY LISA ZAHNER, (Week of August 25, 2011)
Photo: Two homes that show how Vero electric might be split at the city line, with the Castaway Cove home at left going to FPL.

Vero Beach Mayor Jay Kramer said Friday a partial sale of the city’s electric utility would be good for both the city and for those who live outside city limits because it would avoid all the problems and litigation likely to ensue once Vero gets close to getting out of the electric business.

But an FPL official said earlier a few days earlier that breaking up the current Vero electric utility was “not do-able.”

So who’s right?

It turns out that, though technically possible, a partial sale – even if FPL could be talked into it, which seems unlikely – would quite possibly leave island residents more vulnerable to power outages and city residents with the prospect of higher rates than ever as the result of a sketchy business plan.

Kramer said his goal would be to “definitely go lower” with regard to rates for the 39 percent of customers who would be left after a partial sale, but said he couldn’t go on record promising FPL rates.

Vero Electric Transmission and Distribution Director Randall McCamish, while not a decision-maker, said he has looked at what it would take to break the system apart. He said it’s neither pretty nor practical, but it is do-able.

The Vero system operates on a loop of 11 substations.

Three of those substations are located on the barrier island and two of them, theoretically, would go to FPL if the county area customers are cut loose. 

That would leave a single substation just off Club Drive in Central Beach to serve city residents, and about $1 million in upgrades to that substation would be needed.

McCamish said the model that’s been looked at the hardest would sell off the mainland county customers and keep the beach – or at least the Town of Indian River Shores – in the Vero system. It’s unlikely that Indian
River Shores residents would opt to stay with Vero electric, and pass up the one opportunity to get to low FPL rates.

Digging into the details of a back to the the city limits plan shows it could leave beachside customers more vulnerable to problems on the power grid due to congestion and overloading of FPL transmission lines used to bring power to Vero because redundancy would be lost.

McCamish said FPL also would to invest big bucks in constructing high-voltage lines over a vast nothingness between Vero and Osceola County because east-west connections to the power grid are few and far between.

Then comes the nuts and bolts of breaking apart the system – every neighborhood on the border, every street, every meter.

“The system was designed and built as a whole,” McCamish said. “We would have to separate it out piece by piece and work with FPL to turn it over one area at a time. The problem is not so much the transmission, but the distribution.”

This process could take 1-2 years. The good news is that it wouldn’t require much big ticket equipment, but it would postpone the reduction in Vero electric staffing needed to get the electric rates down anywhere near FPL for the remaining Vero customers.

If departments of the electric utility could serve 39 per cent of the customers by spending 39 per cent of the budget, the shrink back to the Vero Beach city limits plan might have a shot. 

But McCamish said he’s crunched the numbers and could maybe get down to a bare bones 60 per cent of his current budget.

The power plant would also not go away overnight – if it went away at all under the city limits plan.

Until FPL completes $20 to $30 million in transmission upgrades to ensure the continued viability of the grid, the power plant could not be dismantled.

Councilmen Craig Fletcher and Brian Heady – who agree on very little – said separately they believe splitting the system is a bad idea.

“I looked at it initially and thought the idea had some merit,” Heady said.

“But I’ve looked at it again and don’t believe that it’s something that we should or could do.”

“I think it’s technically unrealistic and I don’t support retracting back into the city,” Fletcher said. “To describe it as tedious would be a very kind word.”

So who, exactly, besides Kramer is pushing for Vero to keep its utility, even to the detriment of ratepayers? Tallahassee lobbyists representing the other 33 municipal utilities in Florida.

On Friday, the Florida Municipal Electric Association fired off a warning to Vero, reiterating that the association and its members do not approve of Vero trying to get out of the electric business.

The association acts as the political wing of the Florida Municipal Power Agency electric cooperative and its members.

“The FMEA would be totally fine with a partial sale,” Kramer has said in recent months, indicating that the last thing he wants is for Vero to be mired in court for years spending millions on attorneys fighting to leave the association.

The city’s new attorneys on the FPL deal described the association’s power players as the “big brother” who “beat up on their little brothers quite a bit.”

The FMPA has made it virtually impossible for municipal utilities who want to leave because membership contracts were drafted to preserve the cooperative in perpetuity.

As an equity member, Vero has “entitlements” or rights to buy relatively cheap power from generation facilities in which the FMPA owns a share.

That right, along with the corresponding responsibility, runs through the life and decommissioning of the plants – namely the Stanton 1 and 2 coal plants and the St. Lucie nuclear plant.

Vero referendum would open options for power plant land

If and when the City of Vero Beach sells the electric utility, the prime riverfront real estate which now hosts the Big Blue power plant will be cleared for a new use five or more years down the road

One idea is a hotel or convention center to bring in tax dollars and tourists. Others have suggested a park would be the best use of the land. But none of those things can happen without the first step of authorizing the city to lease the property for the purpose of selling the utility.

The Vero Beach City Council, except for Mayor Jay Kramer who opposed the measure, voted 4-1 last week on a first reading of an ordinance to place a referendum on the November ballot regarding the electric sale. The question being put to the voters relates to a restriction in the city charter as to how it uses the riverfront land where the Vero Beach Power Plant sits.

After much discussion and a few different versions, the language approved last week states:

“Do you approve of the lease of the City of Vero Beach Power Plant site north of the 17th Street bridge, west of the Indian River and east of Indian River Boulevard with the city retaining ownership of the land for the purpose of selling the electric utility if the City Council finds that such sale is beneficial to the citizens of Vero Beach?”

Councilman Craig Fletcher said the referendum would serve to give the council a mandate about how to proceed and that it is the first hurdle to sealing the deal.

Former Vero Beach Councilman Charlie Wilson, who helped lead a referendum effort last year about the electric sale, cautioned the city council that the proposed referendum addresses too many issues in one item.

When asked about the legality of the proposed language, acting City Attorney Wayne Comment said he thought it would be okay.

Voters tend to reject complex referendums, especially if they don’t understand exactly what they mean or if the referendum would alter a long-standing document such as the city charter or the state constitution.

This referendum does not change the city charter, which prohibits the city from selling or giving away the power plant property, but only provides clarification that the city has the ability to lease the power plant property to FPL during the transition.

It is unclear what, if any, education about the referendum the city will or can do as there are strict restrictions on spending public money to educate voters about ballot questions. But the rhetoric has already begun from the camp of those who support selling the utility to FPL.

“The referendum is a straw ballot,” said utility activist and CPA Glenn Heran. “If you don’t want to sell to FPL, you’ll vote no because it’s going to hurt this deal, but if you want to continue talks with FPL you’re going to vote for this.”

Heran said he plans to address the ballot question again at the September luncheon meeting of the Indian River County Taxpayers Association when he is the scheduled speaker.

The second hearing of the referendum will be in early September in order to get the item to Supervisor of Elections Leslie Swan by Sept. 12 for placement on the Nov. 8 ballot.