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Carlos Alvarez, Esq. December I I, 2014 Page 7 �. tax levies such that non-citizens are required to fund the City's municipal functions. This diversion of surplus electric revenues results in a massive subsidy that unjustly enriches the City at the expense of the Town and other captive non-resident customers. This massive subsidy has also contributed to driving up the City's electric rates to unreasonable and oppressive levels. In order to protect against unreasonable rates,the City has a legal duty to the Town and its other electric customers to operate and manage its municipal electric utility with the same degree of business prudence, conservative business judgment and sound fiscal management as is required of private investor-owned electric utilities. State v. City of Daytona Beach, 158 So. 300, 305 (Fla. 1934). Under Florida law, customers of an electric utility are not required to bear the cost of imprudent utility management decisions. Gulf Power Co. v. FPSC, 487 So. 2d 1036 (Fla. 1986). Prudent electric utility management requires attention to detail, vigilant oversight, due diligence, and the implementation of proper risk management policies in order to manage fuel price volatility and keep power costs as low as reasonably possible. As described above, the Town believes that the City has breached its legal duty to charge only reasonable rates by employing oppressive rate-making practices that require the Town and other captive non-resident customers to unfairly subsidize City operations that are not related to the furnishing of electric service. In addition,the Town believes the City has breached its duty to prudently operate and manage its electric utility by making a series of ill-advised utility management decisions,including entering into a number of imprudent,expensive long-term power supply arrangements which bind the City to above-market prices well into the latter parts of this century. An elected City official recently stated publicly that his predecessors at the City should never have entered into these long-term power supply arrangements. Furthermore, other City officials have publicly stated that because of the City's obligations under these long-term power supply arrangements, the City's electric rates will be higher than FPL's electric rates into the foreseeable future. To be clear,the Town is not seeking to invalidate the long-term power supply arrangements that the City has entered into in the past. Those are contractual obligations of the City not the Town. Rather,the Town's lawsuit seeks only to show that the City was imprudent in entering into those long-term power supply arrangements in the first place and thus the costs caused by the City's imprudent management decisions should not be borne by the Town and its residents that have had no voice in the management of the City's electric utility. See Gulf Power Co. v. FPSC 487 So. 2d 1036 (Fla. 1986) (customers of an electric utility are not required to bear the cost of imprudent utility management decisions). The City Continues To Disenfranchise The Town And Its Citizens In the Town's view,the City has imposed unreasonable rates on the Town and its residents which the City has used to subsidize its own operations and reduce its citizens' own tax burdens, while not providing the Town an electoral voice in the management of the utility and the use of its revenues. This is troubling because in 2008 the Florida Legislature passed a law for the express purpose of providing all customers of small municipal utilities, including those outside the IW.