OUC braces for loss of its big­gest client

Vero Beach to sell util­ity to Florida Power & Light

Orlando Sentinel - - FRONT PAGE - By Kevin Spear Staff Writer

Or­lando’s big­gest elec­tric­ity cus­tomer — the city of Vero Beach — is get­ting ready to pull the power plug.

It’s a po­ten­tial hit for the ci­ty­owned Or­lando Util­i­ties Com­mis­sion, which is a sig­nif­i­cant fund­ing source for city hall, pay­ing for po­lice, fire, parks, ad­min­is­tra­tion and other ser­vices that oth­er­wise would be cov­ered by tax­pay­ers.

Con­tend­ing that OUC’s price is too high, Vero is push­ing ahead with a sale of its util­ity to the state’s big­gest power provider as a more af­ford­able op­tion.

“OUC has been ac­tively seek­ing a means to make up for some of the lost

rev­enues,” spokesman Tim Trudell said.

This year’s OUC con­tri­bu­tion to Or­lando gov­ern­ment is $90 mil­lion.

OUC, which has 230,000 cus­tomers in Or­ange and Osce­ola coun­ties, stressed that it has been able to pro­tect the city and its cus­tomers from neg­a­tive con­se­quences, in­clud­ing a rate in­crease to com­pen­sate for the loss of en­ergy sales to Vero Beach.

Ac­cord­ing to Vero Beach au­thor­i­ties, that city’s util­ity has been pay­ing roughly $1 mil­lion a month to OUC, a fig­ure that fluc­tu­ates sea­son­ally.

Vero’s util­ity has 34,000 power cus­tomers in and out­side of the city. The city is look­ing for a nearly 20 per­cent drop in rates un­der Florida Power & Light Co.

“The pri­mary driver for us is rates,” Vero Beach city man­ager James O’Con­nor said.

Statewide, de­mand for elec­tric­ity has been flat or grad­u­ally ris­ing dur­ing the past decade, as ap­pli­ances are be­com­ing less en­er­gy­hun­gry and as home­own­ers and busi­nesses have bet­ter en­gaged in ef­fi­ciency prac­tices.

That’s left a sur­plus of elec­tric­ity and no read­ily avail­able buyer for the more than 130 megawatts of power Vero Beach has been pur­chas­ing from OUC for most of this decade.

The Or­lando util­ity also is chal­lenged with con­tin­u­ing to pay debt on a pair of mid­dle-aged power plants, each cost­ing about $1 bil­lion.

They use coal for fuel at a time when nat­u­ral gas has risen dra­mat­i­cally in pop­u­lar­ity among util­i­ties be­cause of its price, con­ve­nience and cleaner emis­sions when burned to gen­er­ate power.

Ja­cob Wil­liams, gen­eral man­ager and CEO at the Florida Mu­nic­i­pal Power Agency, said it’s a buyer’s market for util­i­ties of Florida cities that pur­chase whole­sale power.

Cities are ne­go­ti­at­ing for sig­nif­i­cant drops in rates for short-term con­tracts, said Wil­liams, whose agency is owned by cities and gen­er­ates power for them.

But when it comes to sell­ing whole­sale power, as OUC does, prices are not at­trac­tive, es­pe­cially for elec­tric­ity gen­er­ated with a mix of nat­u­ral gas and coal.

“You have a bit of a head wind,” Wil­liams said.

As part of drop­ping Or­lando’s util­ity as a power provider, which is on track to hap­pen next year, Vero is of­fer­ing to pay OUC $20 mil­lion in com­pen­sa­tion.

An OUC ad­min­is­tra­tor pre­vi­ously told Vero Beach that such a set­tle­ment sum would not nearly cover Or­lando’s po­ten­tial losses from the exit of such a big cus­tomer.

“I wanted you to know that OUC’s dam­ages will far ex­ceed the $20 mil­lion if Vero Beach de­faults on its con­trac­tual com­mit­ments to OUC,” vice pres­i­dent Jan Aspuru said in May of power sales orig­i­nally ex­pected to con­tinue un­til 2023.

How­ever, OUC’s board de­cided this week to agree to a $20 mil­lion pay­ment from Vero Beach.

Also pend­ing in a breakup with Vero Beach is an agree­ment with FPL that it would buy as much as 85 megawatts of OUC elec­tric­ity for two years “start­ing im­me­di­ately upon the ter­mi­na­tion” of sales to Vero.

The Or­lando Util­i­ties Com­mis­sion has not had the smoothest re­la­tion­ship with Vero Beach, a city in In­dian River County about 90 miles south­east of Or­lando.

A power-pur­chase con­tract be­tween the cities in 2010 would soon be chal­lenged by Vero as too costly. Ne­go­ti­a­tions re­sulted in a new con­tract with lower cost power.

That, too, would prove un­wanted; Vero vot­ers called for their city to get out of the util­ity busi­ness. Vero Beach shut down its power plant years ago but re­tains its poles, lines and trans­former net­work.

But be­fore Vero stops buy­ing OUC power, “many things have to hap­pen,” FPL spokes­woman Sarah Gate­wood said, cit­ing steps that would in­clude a state re­view.

With nearly 5 mil­lion cus­tomers, FPL is of­fer­ing to pay $185 mil­lion for Vero’s util­ity.

Most of that would be for a va­ri­ety of costs, in­clud­ing cov­er­ing the $20 mil­lion for OUC and $108 mil­lion for the Florida Mu­nic­i­pal Power Agency.

O’Con­nor, said his city would be left with $30 mil­lion to in­vest, lower rates and the prom­ise of smart me­ters and a mod­ern­ized util­ity.

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