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City to petition PSC over LCEC data

By Staff | Mar 15, 2016

City Council voted 6-1 Monday night to follow the advice of its special utility counsel, Brian Armstrong, and file a petition with the state Public Service Commission intending to obtain cost of service analysis data for the city’s electric service that utility provider LCEC has been unable or unwilling to provide.

Armstrong, a Tallahassee attorney, told council it is his opinion that city ratepayers are being overcharged and subsidizing the rest of LCEC’s customers in five primarily rural counties. He said the cost of service analysis data he did receive from LCEC was for the entire geographical service area, not city specific as requested.

Armstrong estimates that Cape Coral makes up 45 percent of LCEC’s total customer base. He said customer density is about 750 per square mile within the city while the density in areas outside Cape Coral is 55 customers per square mile.

“You can’t tell me that everyone should pay the same electric rate,” said Armstrong. “LCEC is the only rural co-op in Florida servicing a primarily urban area like the state’s 10th largest city. In all their filings with the PSC, LCEC never provided a cost of service study, nor were they asked to file one by the PSC.”

Just last week, the city handed LCEC its proposed franchise agreement, laying out in detail terms the city wants included in the new contract. The current 30-year agreement is set to expire in October.

Councilmember Marilyn Stout disagreed with going to the PSC. She cast the lone dissenting vote on the measure. Councilmember Rana Erbrick was absent.

“I believe this past year has been used as an attempt to discredit LCEC and their CEO,” said Stout. “This line of attack may have worked with some on council and with some employees, but it has not worked with the average citizen. Very often I’ve been asked my position on a Municipal Electric Utility. My stance has never changed. The city should not move forward with an MEU. With the Utility Expansion Program, Bimini Basin, 7 Islands and our one utility, we should not proceed with another major initiative. Except for some city employees, no one I know approves of a council buy-out.”

She went on to point out that LCEC has not raised its electric rate in seven years and, in fact, reduced rates twice. LCEC is among the 10 lowest electric rates of all 56 electric utilities in Florida.

“When I met with the city manager, assistant city manager, city attorney and contract consultant, I was told this franchise agreement was non-negotiable,” Stout added. “I stated that they should probably include something they were willing to give up or it’s not a negotiation. I have since learned that a staff member told one of our concerned citizens this same thing … that it is non-negotiable. I am amazed and disappointed. As I read and reread the city proposal, I came to realize this is an attempted takeover by the city.”

Councilmember Richard Leon took a different view.

“I don’t know where the non-negotiable stance came from. That is just not the case,” he said. “This franchise agreement is not what we eventually will agree upon with LCEC, but somewhere in the middle. It’s a starting point. It’s not an abnormal contract, but it brings the agreement into the 21st Century. It’s a good start, but we have a long way to go.”

Councilmembers Jim Burch and John Carioscia supported the PSC petition.

“We need to get the information through the PSC,” Carioscia said. “To get the best rate for our customers, this is the way to go.”

“I’ve worked with LCEC in the past,” said Burch, who made the motion to file the petition. “There have been struggles like coming to agreements, but nothing I find that is outrageous. There is nothing to stop us from going to the PSC. We need to make that filing, then move on based on the facts.”

Stout also was disturbed by the proposal’s plan to double the franchise fee paid to the city from 3 percent to 6 percent.

“This is a pass through,” she said. “LCEC would not have a business objection to the city increasing a fee the residents pay. In 2015, the city received $5.66 million in franchise fees and $7.28 million in Public Service Tax.”

Armstrong said it was his decision to include the 6 percent figure based on his experience that most franchise fees in Florida are at or very near 6 percent.

He also pointed out that the agreement proposal is not broadly different from the current one, in some cases just putting items back in the city’s proposal that LCEC’s earlier proposal pulled out, including the city’s right to purchase and no sale of LCEC assets without city consent.

The city’s proposed agreement sets a 20-year term instead of 30 years with an opportunity to renegotiate after 10 years. The city seeks an annual capital improvement plan report from LCEC as well as the parties meeting twice a year to review service and complaints.

Before Monday’s meeting, LCEC issued a release stating that any PSC review of the rate structure would make good faith negotiations a waste of LCEC and city resources until the PSC ruled on the city’s petition.

“This appears to be another costly strategy by the city to delay working out a resolution in the best interests of their constituents,” LCEC Executive VP Dennie Hamilton said in the release. “As we have communicated to the city, the cost and effort to conduct additional research by geography would be extensive and would serve no purpose with respect to electric rates.”

He went on to say that while disappointed in the city’s petition, he hopes both sides can come to the table to begin negotiations soon.

In other matters before council on Monday, both the city and Freeman & Hasselwander Resort Properties agreed to a construction completion deadline date of June 30, 2018, for the Westin Conference Center project. The original agreement passed in 2015 calls for the city to repave Pelican Boulevard from Cape Coral Parkway to El Dorado Parkway at a cost of $500,000 upon completion of the center. The city also pledged an incentive of $200,000 in impact fees relief through the city’s Economic Reserve Fund.

Council also set the public hearing date for March 28 to vote on an ordinance to extend the South Cape 4 a.m. bar hours experiment for one year to April 2017.

Council will meet again on March 21 in Council Chambers.