Commissioners issue demands to Florida Public Utilities executives.
By Sid Riley
Last Wednesday afternoon, April 29th, you might have heard some fireworks going off in downtown Marianna. It wasn’t a national holiday, and Main Street Marianna wasn’t sponsoring a festival. Further investigation would have revealed the fireworks were emanating from the City Commission meeting room in City Hall.
In process was the special workshop meeting which was being held for the Commissioners and the public to hear presentations from the consultant hired by Florida Public Utilities, Bob Bellemare, and the independent consultant, Bill Herrington, who was hired by the City to conduct an analysis of the potential purchase of the existing electrical infrastructure and creation of a municipal electric utility in Marianna.
The first portion of the meeting proceeded without incident, with Chuck Stein, a senior V.P. and Chief Operating Officer for FPU beginning the presentation. He was followed by the consultant who presented a detailed analysis of the areas of disagreement over the costs that would be involved for the city to sever their service area from the overall system, and to then reconnect both systems for transmission and continuing operations.
One of the primary areas of difference in the cost analysis was a $4,000,000 value for "ongoing operations", or "good will", which Bellemare had included and the city’s consultant had not recognized as a realistic cost element. Other significant areas of cost differentials were the cost of funding the purchase since FPU’s costing had used a higher interest rate than projected by the City’s consultant. Additionally, the varied approaches used in providing redundant power delivery systems to the Family Dollar Distribution Center created a significant cost difference.
The FPU presentation ended and Bill Herrington began to provide his analysis and rebuttal arguments to the issues which had been raised by the FPU analysis. Florida Public Utilities has argued that the numerous, successive rate increases which moved their rate structure from among the lowest in the State to being among the highest in the State, were caused by fuel charge increases and the creation of a new ten year contract with their provider of power, Gulf Power. These rate changes and the increases in the average billings per household led FPU into a policy of doubling required deposits from most customers.
Then the fireworks began…..
Herrington stated that the new contract which FPU had signed into agreement with Gulf Power was "One of the worse contracts I have ever seen in all of my years of dealing with this industry." His power point presentation displayed excerpts from the contract which stated that FPU must purchase each year of the ten year term of the contract the same number of kilowatt hours as it did the previous year, plus 4%. These costs will be realized regardless of whether the power is consumed or not.
Herrington stated that the utility was stressing conservation and had personnel on the payroll for public programs encouraging conservation, when even if the power usage decreases they will still be charged for the unused power. This means that the stated decreases in consumption which have occurred among Marianna users over the past few years has actually raised the average cost per KWH for FPU. Of course, these added costs are eventually passed on to the consumers.
Even more revealing was the fact that if the City of Marianna does sever from the FPU system and enter into another contract with a power producer, by the terms of the contract, FPU would be forced to continue to buy the same amount of power from Gulf Power, even though there were some three thousand less customers on their system.
At this point Commissioner John Roberts lit the first firecracker. He asked to see the entire contract with Gulf Power, as well as the other four proposals for contracts which were submitted to FPU for consideration when negotiations were underway for a new purchase contract in 2007. FPU executive Chuck Stein stated that this information was not available, and could not be provided. Roberts snapped back "The information had better be on our desks by Wednesday of next week, or else".
Next, Herrington displayed a current bill from FPU for some $47,000 to Family Dollar Distribution. Among the charges was an item termed "County Utility Charge". Herrington asked the FPU team what this charge was for. The rather terse answer was "We have corrected that…". "But what was it for?" Herrington pushed the issue.
"It was the franchise fee which should have been paid to the city instead of the county", was the eventual reply. Further discussion and queries from Herrington revealed that although the city had annexed the properties in the new distribution park south of I-10, the utility franchise fees had been going to the county since Family Dollar first began paying utility bills. In total this appears to be between $200,000 and $300,000 which has been paid to the county and should have been paid to the City of Marianna over those years. This was a real shocker to the City Commissioners and most of those who were present.
Commissioners James Wise and John Roberts also instructed the FPU executives to prepare and submit a proposed new franchise agreement for their consideration prior to the scheduled meeting of May 7. When Chuck Stein again began to argue that this time frame did not allow them enough time for this task, Commissioner Roberts said in a forceful manner "Do the best you can".
Last Wednesday afternoon, April 29th, you might have heard some fireworks going off in downtown Marianna. It wasn’t a national holiday, and Main Street Marianna wasn’t sponsoring a festival. Further investigation would have revealed the fireworks were emanating from the City Commission meeting room in City Hall.
In process was the special workshop meeting which was being held for the Commissioners and the public to hear presentations from the consultant hired by Florida Public Utilities, Bob Bellemare, and the independent consultant, Bill Herrington, who was hired by the City to conduct an analysis of the potential purchase of the existing electrical infrastructure and creation of a municipal electric utility in Marianna.
The first portion of the meeting proceeded without incident, with Chuck Stein, a senior V.P. and Chief Operating Officer for FPU beginning the presentation. He was followed by the consultant who presented a detailed analysis of the areas of disagreement over the costs that would be involved for the city to sever their service area from the overall system, and to then reconnect both systems for transmission and continuing operations.
One of the primary areas of difference in the cost analysis was a $4,000,000 value for "ongoing operations", or "good will", which Bellemare had included and the city’s consultant had not recognized as a realistic cost element. Other significant areas of cost differentials were the cost of funding the purchase since FPU’s costing had used a higher interest rate than projected by the City’s consultant. Additionally, the varied approaches used in providing redundant power delivery systems to the Family Dollar Distribution Center created a significant cost difference.
The FPU presentation ended and Bill Herrington began to provide his analysis and rebuttal arguments to the issues which had been raised by the FPU analysis. Florida Public Utilities has argued that the numerous, successive rate increases which moved their rate structure from among the lowest in the State to being among the highest in the State, were caused by fuel charge increases and the creation of a new ten year contract with their provider of power, Gulf Power. These rate changes and the increases in the average billings per household led FPU into a policy of doubling required deposits from most customers.
Then the fireworks began…..
Herrington stated that the new contract which FPU had signed into agreement with Gulf Power was "One of the worse contracts I have ever seen in all of my years of dealing with this industry." His power point presentation displayed excerpts from the contract which stated that FPU must purchase each year of the ten year term of the contract the same number of kilowatt hours as it did the previous year, plus 4%. These costs will be realized regardless of whether the power is consumed or not.
Herrington stated that the utility was stressing conservation and had personnel on the payroll for public programs encouraging conservation, when even if the power usage decreases they will still be charged for the unused power. This means that the stated decreases in consumption which have occurred among Marianna users over the past few years has actually raised the average cost per KWH for FPU. Of course, these added costs are eventually passed on to the consumers.
Even more revealing was the fact that if the City of Marianna does sever from the FPU system and enter into another contract with a power producer, by the terms of the contract, FPU would be forced to continue to buy the same amount of power from Gulf Power, even though there were some three thousand less customers on their system.
At this point Commissioner John Roberts lit the first firecracker. He asked to see the entire contract with Gulf Power, as well as the other four proposals for contracts which were submitted to FPU for consideration when negotiations were underway for a new purchase contract in 2007. FPU executive Chuck Stein stated that this information was not available, and could not be provided. Roberts snapped back "The information had better be on our desks by Wednesday of next week, or else".
Next, Herrington displayed a current bill from FPU for some $47,000 to Family Dollar Distribution. Among the charges was an item termed "County Utility Charge". Herrington asked the FPU team what this charge was for. The rather terse answer was "We have corrected that…". "But what was it for?" Herrington pushed the issue.
"It was the franchise fee which should have been paid to the city instead of the county", was the eventual reply. Further discussion and queries from Herrington revealed that although the city had annexed the properties in the new distribution park south of I-10, the utility franchise fees had been going to the county since Family Dollar first began paying utility bills. In total this appears to be between $200,000 and $300,000 which has been paid to the county and should have been paid to the City of Marianna over those years. This was a real shocker to the City Commissioners and most of those who were present.
Commissioners James Wise and John Roberts also instructed the FPU executives to prepare and submit a proposed new franchise agreement for their consideration prior to the scheduled meeting of May 7. When Chuck Stein again began to argue that this time frame did not allow them enough time for this task, Commissioner Roberts said in a forceful manner "Do the best you can".
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