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Letter to the EditorPalm Beach Post
July 27, 2012
Lake Worth would lose with utility sale to FPL
Your editorial extolling the merits of a sale of Lake Worth Utilities to Florida Power & Light (“Oddly passive about FPL”) missed some important points.
The Public Service Commission will not allow the cost of this acquisition to be spread over FPL’s customer base; it must be recovered solely from Lake Worth ratepayers. Should the sale price be, say, $100 million for the 87 megawatts of capacity of our generators and the 6 square miles of our recently upgraded distribution system, Lake Worth customers would have to pay $10 million per year above FPL’s prevailing rate for 10 years for the corporation to recover its investment. In addition, any franchise fees and taxes paid will be charged back to us.
The city adds $9 million from utility rates to our general fund in lieu of taxes. Should the sale occur, our taxes will be permanently raised to cover this lost revenue, and our present valuable asset will no longer be ours.
We are 18 months from an exit from the company responsible for our high rates. When we select a new power provider, we can expect a 25 percent rate reduction for energy we have to purchase and a further reduction by production of our own electricity at our plant, since natural gas is near its 10-year low. Please keep the Trojan horse at the gates as a supplier rather than the beneficiary of an ill-advised sale.
LAURENCE MCNAMARA
Lake Worth
Note: The Public Service Commission was called to verify the above statements on who would be responsible to pay back FPL on the sales price. If FPL would want to distribute the cost of buying this Utility to all of its customers, they would have to appear before the PSC.
In other words, we would sell it to them and then have to pay back what they paid us in the first place. That sounds like a deal.
ReplyDeleteSome points may need additional attention.
ReplyDeleteThe value of the Electric Enterprise may be as high as $150,000,000.
With 30 year Treasury Bonds at 2.60% and the 10 year at 1.53%, the marked up debt service on the Purchase Price may be substantially less than $9mil.
With Rate payers overpaying about $16,000,000 annually, the individual customers would be better off with a Sale.
There will be tremendous benefits to the City's Revenues with a reduction in Electric Costs---more providers of goods and services, more employers, etc.
If McNamara's comments are correct, I wonder if there are additional alternatives to consider or variations of his conclusions that should be considered as well. After all, McNamara was one of the enthusiastic supporters of the switch to FMPA and several years ago he was advocating locking into long term natural gas contracts--which would have prevented us from taking advantage of recent plunging gas rates.
Yes. That's why it's incorrect on its face.
ReplyDelete1st of all, if you were to look at what FP&L offered Vero Beach for a system almost exactly double our size, they'd offer us somewhere around $50 million, not $100 million.
While they would not be able to directly charge the rest of their customers an increase to cover paying for our utility, they might be able to figure out some other way, for example profits or funds set aside to acquire systems as part of their business plan, they are obviously able to do it with Vero.
While I'm completely for looking into what an offer from FP&L would look like, I hold little hope that an offer will make financial sense due to our perpetual contracts that require us to purchase 30 mega watts from FP&L's St. Lucie and Stanton.
Vero Beach also has perpetual contracts and it would be interesting to see how FP&L proposes to deal with them.
As the decision for our new wholesale power provider is getting down to the wire, it seems we have great opportunities to reduce our cost. And we hope reducing our costs is passed on to us in the form of rate reductions.
Vero's retail electric rates dropped 30% immediately but have since jumped back up to cut the savings in half. But heck, we'll take 15% reduction all day long.
We still need to look long range. Is it in our best interest to be in the electric business? Should we at least be able to generate all our own electricity? One of the proposals offers just that option.
Do we opt for stable rates (offered by one proposer from Miami that offers power produced by burning garbage)even if those rates do not drop as much as some that offer low prices now, that could fluctuate with the cost of fuel in the future?
3Years? 5 Years? 10 Years? Vero went with 20 years and now wish they had opted for fewer.
MOU's (Municipally owned Utility) or IOU's (Investor Owned Utility)?
The decision we are about to make rivals the importance of the PBSO vs LWPD issue a few months ago.
The PSC would never agree to something like that.
ReplyDeleteFact is that our utility company is a monster that eats away at us each month. It has destroyed the value of our homes and kept us captive for years as city commissioners used it to feed their spending habits. FPL does not have to get its money back from us if it buys our utility. They can invest in any utility they want and make their profit selling power. It's time we wake up and get rid of this monster.
ReplyDeletePlunging gas rates? Are you serious? He was NEVER for going with FMPA. You are confusing him with MAXWELL, ROMANO, EGLY, MCKINNON AND BO ALLEN VOTED FOR IT.
ReplyDeleteNO SANE PERSON CAN EVEN TALK ABOUT THE SALE VS. NO SALE UNTIL WE HAVE A FUC$ING UTILITY AUDIT !!!!!Maxwell DOES NOT WANT the TRUTH to come out to the people. He wants to make a crooked back room deal with FPL.TRIOLO,MAXWELL and AMAROSO all ran on the fact that they would demand and get a utility audit so that the people would know the truth about what is really going on with our utility. FPL has deep pockets,and something funny id going on under the table.
ReplyDeletehttp://geology.com/articles/natural-gas-prices/
ReplyDeleteA graph showing the long-term history of average annual wellhead prices for natural gas produced in the United States. In the 1950's and 1960's the number of homes and businesses supplied with natural gas was growing and a diversity of uses were being promoted. The rapid rise in price starting at about year 2000 was related to an overall increase in natural gas demand and rising energy prices in general. The sharp decline in average annual price that occurred in 2009 was in response to a global economic collapse that drastically cut demand. At the same time an abundance of new natural gas fields were being discovered and that excess supply placed additional downward pressure on prices.
I am looking up the commission minutes of McNamara's recommendation that we join FMPA.
MrmMcNamara was the first one to protest against the false promise of 50 rate reduction if agreed was to join FMPa. Those who can speak the truth, nad were present, know that Mr.Ncnamara had no vote, was not a Commissioner and could not coerce the signing of that odious, Citizens empovering Contract, by forcing the moxt extortionate rates on Lake Worth, with its' 90% residents living below poverty level!The PSC advised Mr.McNamara.
ReplyDelete9:58pm...you do just that. By the way, who wrote everything before your last sentence?
ReplyDeletegeology.com----as per the stated web site
ReplyDeleteCHRIST ,is this Peggy with more papers
ReplyDeleteLawrence is always obsessively focused on the minutia of details. Her this loud and clear... WE ARE ALL SICK AND TIRED OF LAKE WORTH UTILITIES. SELL TO FPL. GET US OUT FROM UNDER THE OPPRESSION THAT LAKE WORTH UTILITIES HOLDS OVER ITS RESIDENTS. I don't care who makes or loses how much money and neither does any of the other actual residents (meaning those who are not obsessed with analyzing every detail of every action), we only want 1 thing - TO GET RID OF LAKE WORTH UTILITIES. I don't care about FMPA, I don't care if FPL makes a billion dollars, I don't care if the City budget loses a billion dollars, I just want to deal with a normal, reputable, and reliable company to service my electricity. Whoever finally makes a sale to FPL happen, will be the hero of LW for generations.
ReplyDeletePLEASE JUST SELL IT.