05/01/2015 - Laserfiche WebLink

Home Browse Search

Town of Indian River Shores – City of Vero Beach – Indian River County Electric Utilities Mediation Page 2 May 1, 2015 2. UPDATE ON MEDIATION PROGRESS SINCE THE DECEMBER 17, 2015 MEETING Mediator Alvarez asked the parties to give a brief synopsis on what has taken place since the December 17, 2014 Mediation and their stance at the present time. City Of Vero Beach Robert Scheffel “Schef” Wright, the City’s Outside Counsel had engaged in talks with the Florida Municipal Power Agency (FMPA), Florida Power & Light (FPL) and the Orlando Utilities Commission (OUC) with the intention to reduce the costs under the FMPA contracts and noted there was little response. He added there was a conversation regarding the prospect for closing the FPL transaction; however, without someone to take assignment of the FMPA Power Supply Contract, there was no real possibility of the transaction going forward. He explained that FMPA and OUC reached an impasse, in which they determined OUC could not accept the City of Vero Beach requirements under the FMPA contracts without violating its bond covenants and the FMPA would not change its bond covenant. Attorney Wright mentioned that the City’s rate study was under way and the consultants deemed the overall cost level, revenue and rate levels on target as for now. He said the System Optimization Study was being done by Power Services on various stage dates, with the last deliverable due in November 2015. Attorney Wright highlighted the City’s efforts to reduce the power supply costs, which represent roughly 73% of the total costs to service. He continued that the majority of the cost was paid to the FMPA with the remaining balance to OUC pursuant to the Power Purchase Agreements and Project contract the City entered into in 2008. He added the City paid $4 million a year to keep the existing Power Plant operational in order to maintain reserve obligations to the Florida Reliability Coordinating Council, the entity that organizes and ensures the reliability of the grid. Attorney Wright focused on the latest new and improved OUC offer in which they agreed to let the City modify the billing demand used to calculate the payment, for a savings of $1.1 to $1.2 million per year, plus an additional discount of $500,000 each year until the year 2018. Additionally, as part of their due diligence, the City continues to evaluate the Florida power supply and energy markets. Attorney Wright revealed two scenarios and emphasized there were risks either way: 1. Take the OUC contract offer valid until the year 2023, that would reduce the City’s demand charges and reduce costs over a period of five years. 2. Terminate the OUC contract and go to the market. According to an analysis by Bill Herrington, he indicated a savings of $32 million at present value through the analysis period which was either the year 2023 or 2029.