Commission votes to stick with FPU

The citizens of Marianna will not be voting on whether the city should purchase an electricity franchise from Florida Public Utilities any time soon.
At a special meeting of the Marianna City Commission, the commissioners voted to consider renewing its service with FPU under an updated proposal. The city’s current contract with FPU expires in February 2010.
A final reading of the ordinance for the proposed agreement will take place at the commission’s regular meeting in June.
Several new items in the revamped proposal from FPU were described by city staff and commissioners as “favorable.”
“With this new proposed franchise, I’m giving them another year ... to see if they do what they say they’re going to do,” Mayor James Wise said.
The franchise proposal doesn’t include all-around rate reductions for customers. But it does include the implementation of times of use and interruptible rates.
Time of use is when a special rate may be applied,  according to the time of day electricity was consumed. Units consumed during off-peak times might be charged at a lower rate than those used during high-peak periods.
Interruptible rates involve times of day when power may be shut off, explained FPU’s Northwest Florida Division General Manager Bob Schelley.
Schelley said it’s not clear yet whether these rates will be available to all customers, or only large users like businesses and commercial customers.
The rate options provide the city with a better chance of recruiting and retaining businesses, Jackson County Development Council Director Bill Stanton said.
“We must have both time of use rates and interruptible rates if we are to still be somewhat competitive,” Stanton wrote in a report distributed at the meeting.
He said a prospective business looks at the discount in power rates as part of its decision to choose which location to base its operation. Tax revenue from such operations can prove beneficial to the city.
“Relatively speaking, it’s a good franchise proposal,” city attorney Frank Bondurant said.
The city is currently under a 10-year contract with FPU.
The new proposed franchise contract also encompasses 10 years, with the stipulation that the city may exercise it’s option to purchase the franchise if FPU does not implement the time of use and interruptible rates within 12 months of the start of the contract.
Additionally, the new contract would require FPU to reimburse the city the $22,000 it spent studying the possible purchase of the city’s electricity system.
That reimbursement stands even if the city chooses to purchase the franchise after 12 months.
Bondurant noted that if the city should choose to purchase the franchise after the 12-month period, information gathered and developed by the city’s consultant would still be fresh.
In its proposed contract extension, FPU also offers to expand the areas in which it will agree to assist the city in installing underground utilities, which Bondurant said will make grant money go further.
The proposal also would give the city the right to produce a portion of its own power, Bondurant said.
Commissioner John Roberts noted the commission’s decision to move forward with renewing its service under FPU doesn’t solve the city’s revenue problems.
That said, he offered the motion that the city move forward in renewing its contract with FPU.
If the city were to purchase the franchise, it would be responsible for setting rates in years to come, which could prove unpleasant, Roberts said.
“I would be very surprised if they don’t double in the next 10 years,” Roberts said, adding that with the city’s gas and water service, 80 percent of the bill goes toward power usage.
Also, if a hurricane were to damage the city’s system, the city would have to come up with the money to make the repairs.
“I seriously question if it’s something we should be getting into at this time,” Roberts said.
Commissioner Paul Donofro Jr. seconded Robert’s motion.
“It’s a very complicated decision. Whichever direction we choose to take, I don’t think there’s a right or wrong answer,” Donofro said.
Commissioner Roger Clay also agreed to renew service through FPU.
“The citizens are going to have to pay more, regardless,” Clay said.
Stanton made similar comments, saying that either way, rates would be subject to a fuel surcharge.
Also, he said, the city would be a relatively small electricity purchaser and would be at a disadvantage when negotiating with an electricity supplier.
With assistance from consultant Bill Herrington, the city studied the possibility of purchasing the electric franchise for about 12 months.
“This is not about reducing rates, this is about revenues generated by that particular enterprise,” city manager Jim Dean said.
Over the 12 month period, Herrington performed a rate study that compared FPU to other electricity suppliers in the state. He also determined how much it would cost to “separate” the city’s electric distribution system from the existing supplier as well as reintegration with the new electricity suppler; and he performed a feasibility study.
Herrington told the commission that the purchase could prove profitable for the city, with the possibility of the city making about $142,000 from running the franchise’s in the first year. 
He told the commission that the total cost to purchase the franchise and get it up and running would be about $10.6 million.
FPU’s consultant disputed some of Herrington’s numbers, estimating that the total cost would be somewhere around $16.9 million. The FPU consultant also forecast the city would likely lose money in the early years of operating the city power grid.