Group slams Dunedin utility proposal

Business leaders urge city officials to halt planning for a city-run electric utility, warning of costly, fruitless litigation with Florida Power.

By DEBORAH O'NEIL

© St. Petersburg Times, published June 28, 2000

DUNEDIN -- A group of local business leaders is urging the city to abandon its investigation into dumping Florida Power and creating a city-run electric utility.

The venture, they say, could cost millions of dollars with no guarantee that the expenses will be justified by lower electric rates or profit for the city. The opinion by leaders from the Dunedin Chamber of Commerce marks the first public stand any group has taken on the complicated issue.

"Looking at the numbers, I personally wasn't convinced it was in the best interest of the city to take on such an enterprise," said Jim Stearns, chairman of the chamber board of directors. "I haven't seen anything to convince me otherwise."

The recommendation comes as the city is preparing a lawsuit against Florida Power that asks the courts to resolve several key issues. The City Commission is expected to vote July 6 on whether to file the lawsuit.

City Manager John Lawrence and Mayor Tom Anderson both said they were surprised the chamber would recommend giving up the inquiry before the city has all the answers about what would be involved in creating a city-run electric utility.

"It struck me as they are throwing in the towel too soon," Lawrence said. "They may very well be right, but we don't know that yet."

But the business leaders said they hope their recommendation will influence the commission to do exactly that: stop now, before the city becomes involved in litigation.

"Once you get into litigation mode, it's hard to stop spending money," said Clearwater attorney Mike Mackenzie, who headed a chamber committee that studied the issue. "Litigation always looks wonderful when you're going in and awful when you're coming out."

The business leaders were on a four-member committee of the Dunedin Chamber of Commerce that attended meetings on the issue and studied reports from Florida Power and a city consultant. The committee included Mackenzie, Dunedin real estate agent David Eggers, former City Commissioner Don Jones and Florida Power executive Gail Simpson. The committee's recommendation was endorsed by the chamber of commerce board of directors.

Florida Power executives have long been active in the Dunedin Chamber of Commerce. Last year, Florida Power contributed about $3,000 to the chamber for event sponsorships and dues, said Bob Bellavance, president of the chamber. Mackenzie said neither the group's relationship with Florida Power nor the presence of one of its employees on the committee influenced the recommendation.

The committee cited five reasons to support its recommendation:

The city has not taken into account how two fees known as "stranded cost" and "going concern" would affect the cost of buying out Florida Power's system. Florida Power has not yet calculated stranded cost, but in a study indicated going concern would cost Dunedin $29.4-million. A study by the Pittsburgh consultant hired by the city concluded the city should not have to pay either fee, but estimated Florida Power could ask for as much as $24.7-million in stranded cost. The city says it does not have to pay either fee, a position Mackenzie said the committee felt was naive.

The process will tie the city up in lengthy and costly litigation. The committee came to that conclusion after looking at other cities elsewhere in the country that have spent millions of dollars and many years trying to break away from an electric utility.

The city collects a profit of $1.5-million from its contract with Florida Power without any of the burden of operating the system.

The city could be put at a disadvantage in the future when the electric industry is deregulated.

From a political viewpoint, the chamber believes the city should not be in the business of providing electricity historically provided by private industry.

"There just isn't anything to us business people that indicates it makes sense to keep going," Mackenzie said. "Our feeling is the continued involvement digs the hole deeper."

There are huge disparities between what Florida Power and the city's consultant say starting a city utility would cost. The city's study indicated that Dunedin could save $3.5-million by breaking away, but Florida Power officials say the city would lose money and have to raise electric rates 12 percent to 15 percent.

There also are numerous unresolved legal questions, some of which would be answered if the city sues Florida Power.

City officials said they need answers to those questions.

"For us to prematurely say it doesn't make sense, I don't think it's the proper position to take," Anderson said. "The city is going forward unless three of the five commissioners say we shouldn't."

© St. Petersburg Times. All rights reserved.