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Shores has new ‘Plan B’ for lowering electric rates

STORY BY LISA ZAHNER (Week of March 12, 2015)

Indian River Shores residents now have one more reason to hope and pray their lawsuit seeking to exit the Vero Beach electric system prevails: The new ‘Plan B’ of immersing the Shores Town Council in the business of rate regulation is fraught with cost and peril.

Should the town’s lawsuit fail – or should it prevail, and the town not be able to convince Florida Power and Light to take over its customers – the new contingency plan is to try to regulate the rates Shores customers pay.

Mayor Brian Barefoot said the rate-regulation plan is completely separate from the town’s lawsuit against Vero, which is shelved until May 15.

“This really has nothing to do with that. This is not to pre-judge any of that. This is to put something in place, with the benefit of hindsight, to protect our residents, that if we had something like this we wouldn’t be in this position,” Barefoot said.

During a workshop on Monday, town council members asked tough and pointed questions of attorney Bruce May and rate consultant Terry Deason, whom they’ve hired to position the town to do whatever it can within the law to protect electric utility ratepayers’ interests.

“From a legal standpoint we certainly believe that you have the home rule powers to protect your residents,” May said.

Under the current 30-year franchise agreement which expires in November 2016, May said the Shores – in exchange for being charged reasonable rates by Vero – temporarily gave up its right to regulate the rates charged by Vero.

But once that franchise expires, with the proper infrastructure in place, the Shores argues it could re-exert that right.

“Once that franchise expires we don’t see any legal restrictions to you regulating the rates,” May said.

The plan does not in any way guarantee that Shores customers would pay anything close to FPL rates.

The utility provider, whether the City of Vero Beach or someone new, would present all the various costs that go into the rate, and the Shores would be required to take testimony – just like the state Public Service Commission – and make a strictly evidence-based ruling on what costs to allow and what costs to toss back at the utility provider to cover some other way.

Two of the tests the Shores could employ would be whether or not the cost is derived from prudent action, and whether or not the utility demonstrates that the expense provides any benefit to the ratepayer.

One major pitfall of the plan is that the electric utility might very well appeal every decision of the Shores’ rate-making authority, tying the public up in endless court battles. Should Vero electric end up still being that utility provider, city officials could object to the Shores’ argument that it even possesses rate-making authority at all, opening up yet another court battle using ratepayer dollars to pay the legal bills.

Secondly, the plan would make the Shores dependent upon the advice of pricey legal and regulatory experts that they would need to keep on retainer to help them operate the regulatory authority.

Shores residents also would pay a surcharge on their electric bills that would go into a fund for this purpose, thus creating a never-ending gravy train for these consultants.

Deason said he and May inserted a clause saying that a utility such as Vero could tie its rates to the Public Service Commission-regulated utility already operating in the town, namely FPL, to avoid regulation by the town’s own authority.

“This could be a very cost-consuming and time-consuming affair if we didn’t simplify it a little bit,” Deason said.

Town Attorney Chester Clem raised some concerns whether the subpoena power of the town would be respected by the city of Vero Beach, and whether the existing level of town staffing could absorb the extra workload of managing a regulatory authority.

“If and when it’s adopted, it’s going to require a re-structuring to some extent of our core departments,” Clem said. “When you get to the hearing date, you’d have some professional advice to whomever is on the council.”

Clem’s comments point to a third major downside – which cannot be overstated – in that it plunges a very small town with limited staff and no technical utilities expertise smack into the complex and costly world of governing the business practices of an electric utility.

On top of that, the Shores would bear all the legal and procedural responsibilities of acting as an objective regulating court, which must afford due process to both the regulated utility and to its citizens – flying in the face of the concept of getting the government out of the electric business.

It also leaves the Shores’ neighbors in the city of Vero Beach and unincorporated Indian River County stuck with whatever unregulated rates Vero wants to charge them.

“Is it possible that the city, as a result of our regulation, could charge us a different rate than their other customers?” Councilman Dick Haverland asked. Deason’s answer was yes.

After the meeting, County Commissioner Tim Zorc said, “It seems like a closed door at the end of a hallway.”

Zorc said he and County Attorney Dylan Reingold, who were in attendance at Monday’s workshop, now have two tasks ahead of them.

First, the county will need to determine what potential impact a Shores rate-regulating authority might have on south barrier island and mainland county electric ratepayers. Second, the county will need to explore whether or not it has any right to regulate Vero’s rates itself after the county’s separate franchise agreement expires in March 2017.

No action was taken on the draft ordinance presented by Deason and May, but the town council agreed to meet  again on March 26 and, in the meantime, funnel comments or questions through Town Manager Robbie Stabe for incorporation into an amended draft.

Barefoot noted that the council had just received the documents.  

“I think it’s prudent for us to understand fully what’s in this document. If we’re comfortable with what’s in this ordinance, we could have a first reading in March, a second reading in April. If not, we could do a first reading in April.”