Breaking away from big power not easy

By Rick Barry | Nov. 3, 2010

Sarasota didn’t make the leap to energy independence Monday night, but it isn’t alone: Dozens have considered divorcing a large, investor-owned power company and going independent. But in recent memory, only one has actually done it: Winter Park.

And Winter Park Electric Utility Director Jerry Warren is as proud as a new father of his city’s hard-won independence, the 20 local employees who keep the system up and running, and the evolving promise of big improvements and revenues to come.

The city-owned electric utility began serving its 28,000 residents in 2005 after voters overwhelmingly approved its creation, and the purchase of Progress Energy’s entire distribution system. The deal was expensive. The generally affluent Orlando suburb issued bonds to pay the investor-owned utility $43 million for its feeder lines, substations, poles and wires.

It would have cost Sarasota more than double that.

But today the Winter Park utility is well into Phase 1 of what will ultimately be a $67-million, 20-year program to vastly improve system reliability, especially including the elimination of overhead lines by burying them underground. It has started that process with main feeder lines, virtually eliminating their vulnerability to hurricanes. Burying the lines also greatly improves the appearance of commercial and residential areas, as the visual clutter of poles and lines disappears.

That’s expensive, too: At about $220 a foot, it’s a cost big power companies traditionally have not undertaken.

Part of the $18-million bond issue paying for that first phase of “undergrounding” is reserved for matching funds for neighborhoods willing to pay half the cost of burying their power lines sooner, rather than waiting many years. A few have seen the work completed already. Automated meter-reading equipment is also planned.

But Winter Park is far from the only Florida city providing residents’ electricity. Thirty-three others run their own utilities, serving 3 million people, 14 percent of the state’s customers. There are 2,000 nationwide. Among the largest in this state are Jacksonville, Gainesville, Tallahassee, Lakeland and Ocala.

Some have had their systems almost from their cities’ founding. But Winter Park is the only one in decades that has severed the ties with Big Power and gone independent.

What strongly motivated Winter Park was the fact its electrical service had become unreliable, arguably the worst in the state, said Barry Moline, executive director of the Florida Municipal Energy Association, which serves its 34 client cities. And, Winter Park’s franchise agreement with Progress Energy was expiring – and with it the city’s right to buy out the utility’s local assets and bury those vulnerable, unsightly wires. What’s more, Moline said, the utility wouldn’t even agree in writing to fix the reliability problem – or allow the city to buy out the poles and wires at any point in the future, just as FPL allows no buyout clauses.

So, Winter Park took the opportunity and went independent with better than 2-1 voter approval, and it’s worked out very well indeed, Warren said.

But going it alone is not for the faint-hearted, he allowed.

If a city’s leaders are prone to excessive “hand-wringing” in making major decisions, it probably isn’t for them, he said. It takes dedication and unwavering, relentless effort on the part of city administrators and elected officials to make it happen, and they have to stand up to the investor-owned utility’s “scare tactics as they try to convince them to sign another 30-year contract – and they are generally pretty successful at it.”

If cities do go independent, he quickly added, “They need to hire really good, experienced people to run the system. You have to think of it like a business.”

This is not news to the city of Sarasota. Both Moline and Warren came to Sarasota for a workshop several weeks ago to discuss creating a municipal utility. It was Moline’s assessment that it was largely the idea of someday increasing renewable power sources that had inspired Sarasota’s interest – it wasn’t that the power was kicking off all the time or that costs were really high. FPL’s rates are the lowest in the state.

He said he doubts such vague motivations are enough to drive officials to action or win the citywide referendum it could take to make such a big and costly change. It could be 30 years or longer before the city got to keep its “profit” from electric customer revenue – after bond issues were paid off. Such revenue today pays about one-third of the City of Gainesville’s budget, for example, keeping taxes there quite low.

“It mustn’t be an emotional decision.” Moline said, and Sarasota could have delayed a decision for many months or longer without any fallout from having no franchise agreement. But at some point, FPL would have threatened to stop collecting the tax that customers pay to the city as a “franchise fee,” and on which the city depends if it is determined not to raise other taxes or fees to make up the difference.

Moline said three or four cities come to him each year to explore the possibility of forming an electric utility. His association provides a wealth of professional experience and factual information, and it spends a lot of time with them – but every city except Winter Park has backed away from the challenge.

Winter Park’s Warren concedes that sometimes “it’s been rough” over the past five years. “But if a city really wants local control over its infrastructure, it’s critical … If we had it to do over again? I’m sure we would.”

Rates can go up, especially at first because of bond issues or unexpected capital expenses, Warren said, but they’ve leveled off there. The average Winter Park homeowner pays $123.90 a month, just 20 cents higher than the average among investor-owned utilities.

But with crews right there in the city, small outages are taken care of really quickly; service is very good, he said.

Laws require existing power producers to sell power wholesale to municipal providers, and all electric utilities – cooperatives, city-owned utilities and big power companies alike – have signed mutual aid pacts to work full-bore statewide to restore power in the event of massive outages, such as those from a major hurricane.

“Like anything that’s really worthwhile, it’s hard to do.” Warren said. “But it’s the way to go.”

 

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One response to “Breaking away from big power not easy

  1. What the City of Sarasota did in agreeing to a new 30 year franchise doesn’t stop progress. We need a plan for energy conservation, retrofitting homes and businesses and institutions and a new infrastructure for renewable energy. With a Plan we can tell FPL this is what we are going to do like it or leave it. What about getting together and discussing the elements of such a plan and a strategy for implementation. In other words life goes on and the issues that we raised don’t go away so let’s get to work.

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