Progress Energy tries to sway Belleair, which has a contract that allows it to form its own utility.
By LORRI HELFAND
Published August 5, 2004
BELLEAIR - Progress Energy executives offered the city an olive branch of sorts this week, hoping to convince town leaders that they should drop their efforts to break away from the giant power company and start their own utility.
But most Belleair leaders say they weren't swayed by Tuesday night's presentation.
"It's the same old stuff, just a different day," Mayor George Mariani Jr. said.
Belleair took the utility to court four years ago to enforce terms of a contract both sides signed in 1971. Belleair officials argued that the contract gave the town an option to buy Progress Energy's electrical equipment when the contract expired.
Last year, after a three-year legal battle, a court-ordered arbitration panel ruled that it would cost Belleair $8.5-million to buy Progress Energy's poles and wires.
The town of about 4,100 people commissioned two studies to see whether it would be financially feasible to sever ties with the energy giant.
Both a recent study by First Southwest Co. of Dallas and a previous study by Strategic Energy Ltd. of Pittsburgh found Belleair's goal feasible.
According to First Southwest'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 the profit annually to about $860,000 by the 20th year.
Progress Energy has about 2,500 Belleair customers, and its 2003 gross revenues for the town were $4.7-million.
Gail Simpson, Progress Energy's public policy manager, told the Town Commission that average customer rates and other figures used in the First Southwest study were flawed. She used a PowerPoint presentation to demonstrate how Progress Energy's estimates turned gains assumed by Belleair's consultants into losses.
Ron Hill, dean of the University of South Florida College of Business, who was asked by Progress Energy to review the study, told the Town Commission that he had questions about the report as well. He offered complimentary services from a USF forensic accounting team to conduct further research.
But First Southwest Co. consultant Jerry Warren stood by his figures and his 45-page report.
"We were hired to give our independent opinion. It's not in our best interest to make the picture optimistic. We try to be very careful," Warren said.
While Simpson presented the city's risks in taking on its own enterprise, David Phillips, the utility's south coastal region vice president, stressed the advantages of signing a new contract with Progress Energy.
About four years ago, Carolina Power & Light acquired Florida Progress and its utility Florida Power. The combined company, which runs its Florida operations out of St. Petersburg, is Progress Energy.
Phillips said previous management underestimated the importance of an option in contracts that gave towns permission to buy electrical equipment when agreements expired. He said a future contract would include that type of clause with added guarantees to ensure it could be enforced. Progress Energy spokesman Aaron Perlut later said it's likely that only a 30-year contract would include that clause.
The utility also offered to cover litigation costs Belleair has incurred in its three-year court battle, Phillips said.
After the meeting, Mariani said the promise offered too little too late. The town's past agreement had a similar purchase clause and it still ended up in court.
"Why should we have ever litigated?" Mariani asked.
But a few residents who attended the meeting said their leaders haven't sold them on the idea of municipal power yet and they aren't sure if a Belleair-run utility will be as reliable.
"I don't think the town could possibly run it," Josephine Houck, 80, said.
David Adams, 50, didn't think the town could be successful in the power business either and wondered whether Belleair would provide the level of customer service that Progress Energy has.
Thom Wright, 47, hasn't made up his mind yet.
"I think the citizens of Belleair are now being informed of all the facts on both sides of the issue," Wright said.
Commissioner Gary Katica said the issue would be on the town referendum in March 2005 and residents would make the final decision themselves.
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. Previously, 32 other municipalities in Florida have formed their own publicly owned utilities.
Winter Park will run its own utility, but in June, the town signed a five-year contract with Progress Energy to purchase power from the energy company.
