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LOUIS HAUA court dismisses Progress Energy's arguments, saying utilities must collect franchise fees.
A Florida Supreme Court ruling could make it harder for investor-owned utilities in the state to prevent municipalities from setting up their own electric companies.
On Thursday, the Supreme Court rejected arguments made by Progress Energy Florida of St. Petersburg that it did not have the right to collect franchise fees from customers after a municipality's franchise agreement with the utility has expired.
A franchise agreement gives an investor-owned utility such as Progress the right to sell electricity in a municipality. Such contracts usually require the utility to collect a franchise fee - effectively a tax on electricity consumption - through customers' monthly bills and pass the money on to the municipal treasury. Such fees can add up to a large chunk of a municipality's operating budget.
As a result, utility companies have great leverage when negotiating franchise agreements that come up for renewal, according to Barry Moline, executive director of the Florida Municipal Electric Association in Tallahassee.
But after this week's Supreme Court decision, "Progress or any other investor-owned utility would no longer be able to hold a city hostage by threatening to no longer collect a franchise fee for revenue," Moline said. "One of the weapons that Progress has been using has been the threat to take away that franchise fee. The (court) decision takes that threat away."
The issue is a particularly relevant one for Progress. Fed up with chronic reliability problems, residents in the Orange County city of Winter Park voted overwhelmingly last year to cut their ties to Progress and set up a municipal electric utility.
It had been more than four decades since a Florida municipality had made such a move, but at least two others are thinking about following Winter Park's example. The neighboring town of Maitland and Belleair in Pinellas County, both of which are served by Progress, have been exploring the formation of their own utilities.
Progress spokesman Aaron Perlut said the utility isn't concerned the ruling will affect future negotiations to reach franchise agreements. He noted that the company has signed new contracts with more than 30 Florida municipalities since 2001.
"Most cities want to continue their relationships with us," he said. "It's been demonstrated over and over and over again as we continue to re-sign franchise agreements with cities and towns across Florida."
The Seminole County town of Longwood signed a 30-year franchise agreement with Progress last year. Longwood city administrator John Drago said the prospect of losing franchise fee revenue didn't affect the city's decision to renew. But he added that the Supreme Court decision means that municipalities mulling a potential break with an investor-owned utility will no longer have to deal with legal battles over franchise fees.
"If (Progress) tells you the opposite, that's a bunch of bunk," Drago said. "The ones that are in negotiations now like Maitland, they're sitting in the cat bird's seat."
Louis Hau can be reached at 813 226-3404 or hau@sptimes.com