A financial consultant says the town could buy equipment, sever ties with Progress Energy and form its own power utility.
By LORRI HELFAND
Published May 14, 2004
BELLEAIR - Town officials have ammunition in their city's effort to create a power company of its own.
A study by First Southwest Co., a Texas-based financial consulting firm, says it would be financially feasible for Belleair to buy equipment from Progress Energy and sever ties with the energy giant.
According to the study, startup costs would be $9.3-million, which the town could pay off over 30 years.
The company's calculations relied on several scenarios. Based on the company's best estimate and a January 2006 implementation date, the study said the town could make a profit of $137,000 the first year and increase annually to about $860,000 by the 20th year of service.
Mayor George Mariani said the study proves what city leaders have thought for years.
"It meets or exceeds all of the expectations," Mariani said.
Figures differ from a previous study by another consultant, Strategic Energy Ltd., but that previous study also found Belleair's goal feasible.
Progress Energy, a North Carolina company whose Florida operations are run out of St. Petersburg, disagrees. And Vincent M. Dolan, vice president of corporate relations and administrative services, said the town could actually lose $60,000 to about $800,000 annually.
According to Progress Energy, there are three key problems with First Southwest's conclusions. In a letter to Belleair officials, the energy company predicted that its rates would go down by 2006. First Southwest overestimates Belleair's 2006 revenues, Progress Energy said, because it relies on Progress Energy rate increases in figuring the town's rates.
The letter also faulted the study because it assumed the amount of revenue will grow faster than costs and underestimated the cost of purchasing power from other sources.
But Barry Moline, executive director of Florida Municipal Electric Association, a group that supports city-owned power, said he doubts Belleair will suffer.
"I don't know of a single municipal utility that is losing money in the country," he said.
Belleair is following in the footsteps of Winter Park, whose residents voted last year to become the first Florida town to form a publicly owned utility since Key West did so in 1943. Thirty-two other cities in Florida have also formed their own publicly owned utility.
Mariani said the venture "is not rocket science" and the town, which spans 2 square miles, is "a nice, easy box" to handle.
"Belleair is populated by a significantly higher percentage of professionals - doctors, lawyers and engineers - that are not intimidated by the size (of the project), the function and by Progress Energy," Mariani said.
Mariani said the town's utility service would charge the same rates, but Belleair would have an opportunity to own its own utility and improve reliability, aesthetics and property values.
While reliability was a key issue for Winter Park, Belleair had a greater interest in installing utility systems underground in order to improve aesthetics as well. Officials found Progress Energy's assessment of several million dollars to do so prohibitive, especially since Progress Energy would still own the equipment.
The recent study said the prospect of installing underground utilities all at once would not be practical for Belleair either, but suggested the city spend $200,000 annually to install an underground distribution system in stages.
Over the past several months, Progress Energy representatives have met with residents to warn them about the drawbacks of running their own system.
"(Progress Energy's) entire program has been predicated on misinformation and intimidation," Mariani said.
But Progress Energy officials don't see it that way.
"I think we have an obligation to discuss facts and figures with the town and customers. That's what we've been doing, and that's what we'll continue to do. We try to make sure the customers and residents in Belleair get the information they need before any decisions are made," Progress Energy spokesman CJ Drake said.
Last year, a court-ordered arbitration panel ruled that the city's cost of buying Progress Energy's poles and wires with which to operate its own utility would be $8.5-million. The decision followed a three-year battle between the town and Progress Energy.
Belleair officials will now seek bids for contracts to operate and maintain the electric system for the city and to supply power, Mariani said.
If everything moves forward, Mariani said, the plan should go to voters by the end of the year.
"I think the citizens of the town, if they educate themselves and come to meetings, will see that they have a unique moment to improve their lot in time by severing their ties with Progress Energy," Mariani said.