VERO BEACH, Fla. - Florida Power and Light Co. has sent the city a letter of intent to buy the electric utility system for a cash payment of up to $100 million.
The letter, delivered to City Hall on Monday, also said that if purchased, customers of the city’s utility would receive the same rates as other FPL customers receive, which it estimates is about 15 percent below the city’s rates.
The company wrote that it would assume certain liabilities that would otherwise be the city’s responsibility, such as the electric employees’ pension plan.
Active city electric utility employees will be assured two years of employment, as well as access to employment opportunities with FPL to allow for an orderly transition of operations and to minimize the impact for existing city employees, wrote the company.
Some other key points of the proposal include:
FPL will provide additional revenue streams in the form of property taxes to the city and to other governmental bodies served by the city’s electric utility, including the county and Indian River Shores, totaling more than $1.7 million. The amount includes more than $500,000 in support of the Indian River County school system. Vero Beach’s share of that amount is estimated to be about $100,000.
The city could receive franchise fee revenue from FPL of about $1.4 million annually, which would be based on the city imposing a franchise fee that typically amounts to 5.9 to 6 percent of the electric bill. Such franchise fees are imposed by Indian River County, Sebastian and other communities served by FPL.
The city would receive lease payments from FPL for the property on which the power plant sits and could use or sell that property when the plant is eventually decommissioned.
Mayor Jay Kramer, who had a full day of other meetings and was preparing for Tuesday’s council meeting, said he needed time to review the document before commenting.
“I don’t know what to think just yet,” said Kramer.
Former councilman Charlie Wilson, who made the motion to invite FPL to the table in 2009, said he thought it was “an excellent offer and solves nearly all the problems Vero Beach has right now.”
FPL representatives will attend the April 19 City Council meeting to discuss the proposal.
Sam Forrest, FPL’s vice president for energy, marketing and trading, said the company is hoping at that meeting to get council approval for city staff to begin negotiating a purchase-and-sale agreement for the system.
Part of the process will involve figuring out how to handle the city’s wholesale power contracts with the Orlando Utilities Commission and Florida Municipal Power Agency.
Also still to be determined is how much a loss of the transfer of the about $5.6 million from the city’s electric utility into its general fund could impact taxes.
Last summer, city officials said an analysis done by outside auditors said the city’s property rate could almost double from $1.94 to $3.56 per $1,000 of taxable value even if it were to recover $2 million per year from a franchise fee.
The City Council at a special meeting at 1:30 p.m. Tuesday will discuss whether it wants to move forward with its own financial and legal analysis of the city’s system, which potentially could cost more than $200,000.
Even if the city were to agree to move forward right away with a sale of the system, it could take several months before Florida Power & Light could take over the operation.
Forrest said approvals would have to be sought from a number of different agencies, including the Federal Energy Regulatory Commission, the Florida Public Service Commission, and the Securities and Exchange Commission.
“It will be a lengthy approval process,” said Forrest.
The city’s power plant on the banks of the Indian River Lagoon also will be staying in place for a while.
Under the FPL proposal, the company will lease the power plant from the city and it will determine if and when the power plant is removed from service.
If the power plant is removed from service, FPL will be responsible for dismantling it and the property it sits on will be retained by the city, which will be responsible for any environmental clean-up other than environmental impact caused by releases from FPL.
As a condition to the purchase, the city would have to end its wholesale power contract with Orlando Utilities Commission and it would be responsible for payment to OUC as a result of ending the agreement early, which potentially could be as much as $20 million.
Forrest said the offer of up to $100 million made by FPL should be enough to cover the payment to OUC and other debts associated with the electric utility.
FPL, in taking over the system, would also be fully funding the electric utility’s underfunded pension fund.
City officials recently announced they would be reducing electric rates about 3.5 percent in May. For residents using 1,000 kilowatt hours of electricity per month, the rate would fall from the current $113.14 to $109.14.
According to the most recent rate