City staff: Approve FPL franchise

City staff: Approve FPL franchise

By PETER GUINTA
peter.guinta@staugustine.com
Publication Date: 01/23/09


The St. Augustine City Commission will soon decide whether to extend a 30-year franchise agreement with Florida Power & Light, which tacks a 6-percent fee onto city customers' electric bills.

John Regan, operations officer for St. Augustine, said Thursday that the city staff examined all the options available -- including not signing the extension -- and had decided to recommend approval of the deal.

He said the franchise fees raise $1.3 million per year for the city.

"You have revenue coming in paid by tax-exempt agencies, such as Flagler College, (The Florida School for the Deaf and the Blind) and the (Florida) National Guard," Regan said. "If we don't collect the franchise fee, how does the city replace the money?"

David G. Cobb, an engineer representing FPL, said the renewal changes nothing. The city would just be prohibited from starting its own power company.

"It doesn't prohibit any other company from coming in and selling electricity, and doesn't deny the city the option of creating its own electricity (such as solar or wind power)," Cobb said.

FPL wants the agreement to be 30 years so they can borrow money and tell lenders they have a secure revenue stream.

"The long-term relationship works for both of us," he said.

Regan said, if the contract is not signed, the city would have to create a new revenue stream to replace the franchise money.

"There are 7,138 residential accounts in the city, and 2,081 non-registered accounts," he said. "The residential accounts bring in $449,516 and the non-residential bring in $760,100."

He said the average home pays $62.98 per year in franchise fees.

But if the city didn't collect the fee, it might be forced to raise property taxes by 0.8 mills, meaning that a $200,000 home would pay an additional $160 per year.

Or, he added, the city could cut spending.

"(But) right now, we are cutting to the bone everywhere we can," Regan said.

Other options include "municipalizing" the electric system by buying it, and arranging for Jacksonville Electric Agency to take over the city.

Both of these choices are expensive. Buying the system would cost millions for the wires, transformers and other equipment in the city owned by FPL, and transferring to JEA to get lower power rates would require financing $50 to $70 million.

In October, the cost of 1,000 kilowatts from JEA was $119.59, while FPL's cost was $109.50.

Regan said, "In this case, the data speak loudly. We're going to recommend renewal."


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