City explores utility options

City explores utility options



By KATI BEXLEY
kati.bexley@staugustinerecord.com
Publication Date: 08/18/08

St. Augustine city staff is weighing its options about whether the city should renew its 30-year franchise with Florida Power and Light.

The city has three main options: renew its franchise with FPL, use FPL's services without the franchise, or buy out FPL's equipment in St. Augustine and start its own electric company.

City staff is gathering information on all the options, although they have warned City Commissioners that it could cost $50 million to buy out FPL.

An FPL spokesman has said renewing the 30-year franchise would benefit both FPL and the city by guaranteeing stability from the lengthy franchise. It also allows FPL to show it is financially steady because it has customers locked in for the next three decades, the spokesman said, while the city gains roughly $1.3 million annually in franchise fees.

If the city did not have a franchise, it would likely have to replace the lost franchise fees through another form of taxation, said John Regan, city chief operations officer. However, customers would see their electric bills decrease without the franchise fee.

Barry Moline, Florida Municipal Electric Association executive director, works to unify 34 city-owned electric companies. He said a city shouldn't get into the business unless it's "extremely unhappy with its current service."

"It has to be a legitimate problem and you can't get a response from FPL," he said.

Regan said the city doesn't have any major service issues with FPL.

Moline said there are very small cities, such as St. Augustine with roughly 8,000 FPL customers, that run their own electric company. But, he said, it's a commitment.

"It's not rocket science. Cities can do it," he said. "But it's a commitment of millions of dollars. You have to swallow hard and commit to doing it."

Regan is putting together a team of experts on the subject to research the FPL franchise further. He will bring the report back to the commission in mid- to late September, he said.

Q and A on the city buying out FPL.

The following answers are from John Regan, city chief operations officer; Barry Moline, executive director of Florida Municipal Electric Association; Dave Cobb, FPL Northeast Florida external affairs manager; and Karen Pan, St. Johns County spokeswoman.

Q: Does the city need a franchise with FPL to use their services?

A: No.

Q; If the city did not have the franchise, would customers' rates go down?

A: Yes, city staff says. However, the city would have to find a way to make up the lost franchise fee revenue, about $1.3 million a year.

Q: How much would it cost the city to buy out FPL's power poles, lines, etc. in St. Augustine?

A: Perhaps more than $50 million.

Q: Would the city lose money if it does not renew the FPL franchise?

A: Yes. The city gains roughly $1.3 million annually in franchise fees. Next year, that would go up to roughly $1.4 million. If that money went away, the city would find another form of taxation to get the funds.

Q: Why does the franchise have to be 30 years?

A: Historically, FPL has always had 30-year franchises. It provides long-term planning for both the city and FPL. It also aids FPL in long-term designs for facilities and allows the company to show a steady stream in financial markets.

Q: Would residents see a change in their service if the city still used FPL without a franchise?

A: No.

Q: What would the city gain if it had its own electric company?

A: The city could financially gain from owning the business and could offer more intensive customer service, especially because the customers vote for the City Commissioners.

Q: Would residents' electric bills go down if the city had its own electric company?

A: Municipal electric companies rates are usually about the same as FPL. City of St. Augustine staff say they worry rates will go up to counter the cost of buying out FPL.

Q: Who would govern the rates if the city owned its electric company?

A: The City Commission could determine the customer rates, and it would report to the state Public Service Commission for other rate structures for poles, wires and generation. For example, if the city wanted to increase customer rates 3 percent to offset high fuel costs that would have to be approved by the Service Commission.

Q: Does St. Johns County have a franchise with FPL?

A: No. But FPL and Jacksonville Electric Authority serve most county residents.

Q: Could the city and county partner to start its own electric company?

A: Yes. But the customer base would still be small compared to most municipal electric companies.

Q: Are there small cities in Florida that own their electric company?

A: Yes. Some with as little as 1,000 customers.

Q: How many FPL customers are in St. Augustine?

A: About 8,000.

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