Friday, June 22, 2012

Choosing an Energy Provider

Comment Up


After last night everyone in the room must realize what an awesome job this Selection Committee has in front of them in choosing the correct energy provider for Lake Worth. Heck, this is a Commission that has been complaining about electric rates in Lake Worth and blaming the two sitting minority commissioners on everything but the leaky kitchen sink.

Everyone had better pray as the selection committee consists of our five commissioners, three of whom are "visionaries," one volunteer who is Chair of the newly formed Electric Utility Advisory Board and Steve Carr, Finance Director. They are expected to contract with some company to give us better rates than we are now experiencing--the best deal possible.

This entire matter came about because we want lower rates. We therefore, gave FMPA a five year notice that we were exiting to find another provider. As FPL is one of the companies that submitted a bid and some of the commissioners are getting feedback from some citizens that we should sell our Utility to them, don't be surprised in the end that FPL comes out on top in the rankings.

Don't they know that if we (Lake Worth) sell our utility, that we will have to pay back the sales price in the form of rate increases to whomever buys it...possibly $75 million or more? Don't they know that it is really handing over an asset that in essence benefits the buyer and not the seller? Don't they know that we have to pay back the Bond money? Don't they know that we will lose $10 million in our operating budget and we will have to reduce services?

Watching over the entire discussion


Michael Kennedy
Contract Oversight Specialist
Office of Inspector General Palm Beach County

11 comments:

Anonymous said...

While understanding all the points you listed Lynn, I wonder if nobody cares any more about anything except lower rates.
We have heard about how everbody running for office is going to lower the rates, but no matter who gets elected, the rates never go down.

Anonymous said...

FYI, from today’s PB Post:

Opposition to FPL base rate increase spills across political spectrum

By Susan Salisbury, Palm Beach Post Staff Writer

Americans for Prosperity-Florida, a conservative grass roots organization, and Stand Up Florida, a liberal group funded in part by labor unions, might seem to be far apart when it comes to economic issues. But both oppose Juno Beach-based Florida Power & Light Co’s proposed $690.4 million base rate increase for many of the same reasons. . . .

“FPL is a monopoly with no competition, so I have nowhere else to turn for my electricity. Each rate increase amounts to a tax increase. It is unfair for FPL to continue to pad its pockets while my family has to continue to cut and trim our budget,” the dozens of e-mails state in part.

Read about it here:
http://www.palmbeachpost.com/news/business/opposition-to-fpl-base-rate-increase-spills-across/nPcWJ/

Anonymous said...

I understand Lynn, but after all is said and done, FP&L is always 30% to 50% cheaper. All the rest is just chatter to me.

Lynn Anderson said...

I'm sorry. I guess I'm just not driving my point home well enough.

Greg Rice said...

Lynn,
I know this is your blog, and as such this is your platform to express your own opinion. I wish I had the time to respond more frequently to some of the things I read but I don't. Bringing LW's electric rates in line with the surrounding provider, (FP&L) is the most important decision this commission will make. We don’t like high building in LW but it seems we don’t mind high electric bills. You sat there for part of the meeting and heard the canned presentation by our consultant and saw the size of the notebooks that each of the folks up front had that are going to decide who we’re going to get our power from in the near future and like most of the people in the room you left the meeting with more questions that a room full of first graders.

This is going to be a hard decision for the selection committee. There are so many moving parts to this. It’s not as easy as buying a car. We’re entering into a contract that will be decided by a matrix of rankings or numeric scores that will be as much of a subjective decision as it is objective. That’s what makes this decision so challenging. For those in town that know some of the history of our electric utility you know we’ve been at this place before. Before we signed up with FMPA we partnered up with Enron. Remember Enron. That’s where the gas line we’re still paying for came from. Then we signed a contract with FMPA, we see where that has taken us. But there’s one thing I can tell you, if I was to start an electric co-op I’m going to use the lawyers the use to write my contracts. For those that thought the Greater Bay contract was a long contract wait till you see what FMPA contracts like.

But getting back to what made me spend this much time to chime in on this thread, I do believe that in today’s international economic environment we will never be able to be competitive in the electric energy generation and distribution business as public owned and state regulated provider. But if the day ever comes that we are able to get out from under the grip of the entitlements we have with FMPA and we were to sell to a publicly owned and regulated company we will have to pay off the utility bond but we won’t have to pay back the sales price in the form of a rate increase. The PSC would not allow that. That statement has been going around and around but that’s not what would happen. If our utility was bankrupt it could happen, but we all know that’s the not the case here. If the increased customer base and efficiencies obtained by technology advancements can’t repay the investors, in a defined period of time, the PSC would not approve the sale.

As far as FPL and rate increases, we've paid 23% more than FPL customers have been paying for the last 12 years. I'd much rather have the PSC decide if they need and deserve an increase than 5 elected representives who use increases to pay for their poor choices and decisions.

Anonymous said...

No apology is necessary. I think all your points are valid. I just seem to have different overriding considerations than you do. I'm not saying you are wrong, just that we have a difference of opinion.

Anonymous said...

The point should be what is best for the customers if the goal is to best serve those paying for our service. If the goal is to gouge those who pay for utilities, then the choice would be different.

Lynn Anderson said...

Greg--Yes, it is a mind-boggling responsibility and I don't envy anyone on the Select Committee. Hopefully, they all can rely on the experts we have hired to advise us.

You say we will have to pay off the utility bond but we won’t have to pay back the sales price in the form of a rate increase. The PSC would not allow that. That statement has been going around and around but that’s not what would happen

Greg, I believe that you are wrong on this statement. Sebring sold their Utilities and there was a rider on there for 10 or 15 years--they had to pay off the entire sales price and it was paid back through rate increases. The PSC said that was the only way that the buyer (FPL) could get their money back--to charge the municipality where they acquired the Utility. It could not be divided among all customers outside that city.

Greg Rice said...

Lynn, Sebring did have have to pay a ryder when they sold. Why, they bought some kind of what they were told was the state-of-the-art turbine generation system that ended up using more engery than it could generate and their utility was bankrupt. The additional ryder was the only way the state could get someone to come in and take over. A system like ours or Vero's are not in that same situation. Our generators, like Vero's, are old and near the end of their useful life and are less efficient than the new generators but a company like FPL won't need them for generation capacity. If we negotiate well we, like Vero won't be paying additional surcharges. That's the Sebring story.

Lynn Anderson said...

Greg,
From what I have been told, our equipment is very well maintained. This has been attested to at many commission meetings. And yes, it is not new and therefore it is not as efficient as something brand new. What is? BUT--IT IS ALL PAID FOR. This is a big plus. To replace our generation would cost maybe $100 million. We have no funded indebtedness and our Utility can operate as a benefit to LW with the right management.

Lynn Anderson said...

Subsequent to an above post, I was told that it was Progress Energy, not FPL, that bought Sebring.