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Florida Power says cities studying risky path

The company cautions Dunedin and Belleair as they contemplate dropping the private utility to operate their own electric utilities.


© St. Petersburg Times, published February 16, 2000

If Dunedin and Belleair want to ditch Florida Power and start city-run electric utilities, they'll pay a lot of money and take huge risks, a company official said Tuesday.

There's the cost to buy Florida Power's system of lines, poles and substations.

There's the cost to operate and maintain the system.

There's the risk that these small city-run utilities couldn't compete with utilities to purchase low-cost electricity for their customers.

And there's the controversial fee known as "stranded cost" -- the amount of money Florida Power could lose if the cities break from the system.

Stranded costs are the difference between the income Florida Power would have received from the cities and what the utility could get selling the power on the open market.

A study released last week says Dunedin could save $3.5-million annually and Belleair $552,000 by breaking away and starting their own electric utilities. However, those figures assume the cities do not have to pay stranded cost.

That's a bad assumption, said Janice Case, Florida Power's senior vice president.

"We 100 percent believe we are entitled to stranded cost," she said.

Case said she didn't know how much the one-time stranded cost would be, but the study estimated it could be up to $24.7-million for Dunedin and $5.2-million for Belleair. If stranded costs are that high, local officials have said, the plan likely is doomed.

Case said there are other issues, besides stranded cost, the cities need to consider.

"I don't think the issue is stranded cost," Case said. "There's enough significant risk before you even get to stranded cost."

Consultants from Strategic Energy Ltd. made a presentation on the $50,000 study Tuesday to about 50 people in Dunedin, including city administrators, city commissioners, the Board of Finance and Fiscal Review Committee. Later, the Pittsburgh consultant gave a presentation in Belleair to about 40 people including the Town Commission, Electric Franchise Committee and Finance Board.

The communities are considering buying Florida Power's electric distribution system within their boundaries and operating a city-run electric utility resembling water and sewer utilities.

During the Dunedin session, Lisa Anderson of Strategic Energy said it is likely the power company would demand the stranded cost be paid upfront and not in payments.

However, Anderson said, the communities have a strong argument against paying those costs, mainly that the franchise agreements with Florida Power specify that the cities have the right to buy out the distribution system when the franchise expires.

Florida Power officials will give a public presentation at 2 p.m. Feb. 29 at the Dunedin Library on their analysis of the study for both cities. Company officials said they want to join the process as both cities learn more about starting their own electric utilities.

"Part of our role is to educate folks to the real-world aspects of going down this path," said Clearwater attorney Ed Armstrong, who is representing Florida Power in the matter. "That doesn't necessarily have to be done in an adversarial context."

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