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Ex-mayor says Sloan inserted power penalty

STORY BY LISA ZAHNER, (Week of April 4, 2013)
Photo: Former Vero electric utility director Sloan.

Five years after Vero entered into the power contract with the Orlando Utilities Commission that it now is trying to escape, then-Mayor Tom White has identified then electric utility director R.B. Sloan as the one responsible for inserting the $20 million exit penalty into the document.

“I talked to R.B and he’s the one who did it,” White said.  “I know because I questioned it. To me, that was a heck of a lot of money. R.B. said that it was in there to protect both of us, to protect the assets of Vero Beach and to protect the assets of the City of Orlando.”

Sloan, who resigned the year after the contract was signed to take a job in Virginia, and later moved to another position in Texas, left his latest post several weeks ago and could not be located for comment.

Questions to members of the 2008 City Council about how the penalty got into the contract have until now produced only vague responses, or denials of any knowledge of a penalty.  OUC officials are said to have privately indicated the penalty was not their idea.

But last week, Vero Beach 32963 reported that former Councilwoman Debra Fromang allegedly admitted at a 2010 cocktail party that the city put the penalty in the contract as a so-called “poison pill” to make sure Vero did not sell its electric utility.

Now, with a possible state probe looming, other members of that Council who have previously been ambiguous about what they knew about the penalty are for the first time providing more responsive answers.

For example, during his campaign for re-election in 2009, Councilman Bill Fish was asked if he knew about the penalties in the OUC contract when he voted to approve the deal.

“That was a surprise,” said Fish. “You know you have to trust the staff on these things.”

But responding last week to written questions by email, noting that he was relying on memory, Fish said:

“I distinctly remember seeing both of these (penalties) during a meeting with Jim Gabbard and Sue Hersey and agreed with both of them.  Even though there was no movement at that time to sell, any contract should include a penalty to either not perform or to get out of the contract. Had I not seen them, I would have made the effort to get them included as just good business practice.”

Councilman Sabe Abell, defeated in the 2010 election, disagreed with use of the word penalty insisting on calling it a “reciprocal default clause,” a limit of liability put in the contract to protect both parties.

He added that he was first told about the reciprocal default clause just days before the council voted on the deal, when he was shown the highlights of the contract in a PowerPoint presentation by consultant Sue Hersey.

Abell has long contended that he considered the OUC contract to be of utmost confidentiality, so he wasn’t shocked at not being permitted to take the contract home to read.

When asked whether the steep dollar amount of the penalty caused him pause, Abell said he did not have outside business experience with contracts of that magnitude and “thought it was standard for a contract of that size.”

Abell said he did not question how the clause got in the contract and to this day does not know, but added that when he voted for the deal, he never thought Vero would actually be paying $20 million to OUC.

“I don’t think anyone contemplated that there would be a need to break the contract for a sale,” he said.

The only member of the 2008 City Council who refused to answer questions about the penalty was former Councilman Ken Daige.

Daige initially declined to answer questions over the phone, but agreed to respond to two queries posed to him in writing by email under the condition that the referenced page number from the OUC contract was cited.

Vero Beach 32963 submitted questions to Daige as requested on March 24, but as of press time he had not responded. Daige has been asked point-blank in public meetings and has refused to answer whether he knew about the exit penalties.

Electric utility director Sloan, along with consultant Hersey, drove the effort to craft the OUC deal.

As director of the electric utility, Sloan had repeatedly promised the council and the public he would get Vero electric rates down to a level equal or lower than the rates of FPL.

If he could not do that, Sloan vowed, he would resign. Sloan resigned in October 2009, two months before the OUC contract took effect and nearly three years short of the five-year commitment he had made to then City Manager Jim Gabbard.

Ironically, Sloan’s resignation from his latest job as CEO of the Pedernales Electric Cooperative in Texas – the nation’s largest member-owned electric utility – came over a board decision to allow customers a choice of electric providers. His last day at PEC was March 15.