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Vero tells court it cannot force low electric rates


According to the City of Vero Beach and its lawyers, courts have no say over what the city charges for electricity.  Vero says its rates are its business, plain and simple.

The Town of Indian River Shores has sued Vero for breach of contract, contending that the city’s rates are “unreasonable” to a degree that violates a 1986 franchise agreement in which Vero agreed to only charge reasonable rates.  The Shores is seeking damages amounting to the excess that Shores ratepayers have been charged since 2008. That number could add up to $18 million or more.

“Vero Beach alone is vested with the exclusive authority to regulate electric rates and neither the Court, nor a jury, can override Vero Beach’s express right, granted to Vero Beach by Plaintiff, to regulate Vero Beach’s electric rates,” Vero says in its response to the Shores’ lawsuit.

The document also argues that the subject of the Shores’ cause of action allegedly occurred in 1986 when the franchise agreement was executed, which puts it outside the five-year statute of limitations period for a breach of contract lawsuit.

With regard to the refund the Shores is seeking, Vero asserts it is not legal for the court to award such a refund because the whole exercise would amount to rate-making by the court.

“The trial court is without jurisdiction to award plaintiff a refund as an element of damages, since said award would be an unlawful incursion into the legislative arena violating sound principles of separation of powers,” the document states. 

Vero contends that a court may strike down a rate, but it may not impose a different rate, and the refund of the “difference” between Vero’s rates and rates deemed “reasonable” would require the court to determine what a reasonable rate would be. That, Vero’s attorney John Frost argues, would be a serious overreach of the court’s jurisdiction.

“A reviewing court is only entitled to enter a prospective injunction declaring the current fee unreasonable and to make recommendations regarding what it would consider a maximum reasonable rate,” the response states.

The Shores’ attorneys and officials have argued that Florida Power & Light rates, which are paid by the 20 percent of the Shores residents in the northernmost part of the Town, should be used as a benchmark for “reasonable” rates.

Vero’s pleading takes aim at franchise agreements, claiming they have no bearing on a utility’s right and responsibility to serve – a position that will almost certainly garner support from other municipal and investor-owned utilities around Florida.

By filing briefs, requesting to stand as formal intervenors and sending legal teams to present oral arguments, the powerful lobby of utility companies has previously come to Vero’s defense in its disputes with its customers outside the city limits in the Shores and in unincorporated Indian River County. Like Vero, these other entrenched monopolies don’t want their customer base up for grabs every time a 30-year franchise agreement expires.

“The franchise agreement speaks for itself, and Vero Beach denies any other reading or interpretation other than the express written language of the franchise agreement,” the response says.

Fighting the suit from another angle, Vero argues that the Town has no right to seek damages on behalf of the electric customers for breach of contract because it is the Town, not the individual residents, who entered into the franchise agreement with Vero. In other words, Vero’s attorneys say the Town itself lacks standing except for potential damages related to electric service provided to Town buildings such as Town Hall, the Community Center and the Public Safety Department headquarters.

Frost also argues that Vero serviced electric customers within the Town from as early as 1953, and the old Town Hall since 1972 – and that the Town thereby granted Vero the right to use its rights of ways and service its residents, businesses and government buildings long before a formal franchise agreement was executed. The fact that the Shores invited Vero in to serve the Town when it needed a service provider gives the Town “unclean hands” in the matter.

But regardless of what the franchise agreement says, or whether it expires in November, or whether the city’s use of the rights of way preceded the franchise agreement by more than three decades, Vero alleges its territorial rights to serve supersede any rights the Shores claims it has on its own utility rights of way.

“Vero Beach denies that it lacks the legal authority to continue to physically place and maintain its electric facilities where such facilities are presently located,” the response says.

Vero’s sixth affirmative defense in the response is “Estoppel,” claiming that the Shores is prohibited or “estopped from contesting or challenging Vero Beach’s rates for electric services” because Vero relied in good faith on the Shores customers paying their rates under the franchise agreement.

Somewhat shockingly, Vero’s attorneys also argue the city’s rates were reasonable because the rates were less than the maximum it could have charged under the provisions of the franchise agreement. Vero also argues that it cancelled the 10 percent outside-customer surcharge in 2011 because the surcharge was a politically unpopular, and that technically Vero could still charge that fee.

Finally, Vero argues that the rate relief via refund that the Shores is seeking is “directly contrary to the interests of its citizens and commercial establishments who are electric customers served by the City of Vero Beach. Whatever the solution might cost would theoretically be borne by all ratepayers inside and outside the city because the additional cost would be factored into Vero’s rate structure. Or, conversely, Vero could recoup the cost by imposing a hefty surcharge on Town residents.

“The Town’s requested relief of acquisition by eminent domain would force Vero Beach to expend the legal costs of pursuing the Town’s requested eminent domain proceedings, as well as the payment for whatever property and property interests in which the Town can establish it actually has sufficient ownership interests to warrant such compensation,” the document states. “This course of action would similarly be wasteful and unnecessary.”

Vero’s attorneys have also filed a two-count counterclaim against the Shores, alleging that the Town has wrongly stated that it has the right to evict the city from its public lands after the franchise agreement expires. The counterclaim asks for declaratory statements clarifying these issues.

No matter what Judge Paul Kanarek, who took over from Judge Cynthia Cox, rules in the case, it seems destined for the appeals court, and ultimately for the Florida Supreme Court. The Indian River Board of County Commissioners’ legal team argued before Florida’s high court on Dec. 10 for the court to clarify similar issues related to what happens when Vero’s franchise agreement with the county expires in March 2017.

The Shores is also pursuing a simultaneous case with the Florida Public Service Commission (See Shores wants PSC answer on electric controversy).