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City cites lack of transparency, inconsistency of charges with LCEC’s CIAC

By Staff | Apr 12, 2016

Updated to include LCEC comment:

A lack of transparency and inconsistency in charges to customers are the two main issues the city has with LCEC’s Contri-butions in Aid of Construction (CIAC) practices, according to Assistant City Manager Mike Ilczyszyn.

His presentation to City Council came Monday night, two weeks later than originally placed on council’s meeting agenda.

Ilczyszyn told council that LCEC continues to refuse to provide details about how it arrives at the substantial charges to customers for extending electric service in remote areas of the city lacking the utility infrastructure.

“They are not showing causes for the charges,” Ilczyszyn said. “We’d like to know what they are paying for, did they get what they paid for, and if the charges are reasonable.”

He said LCEC claims the costs are proprietary and confidential as its reason for not providing the information requested.

Ilczyszyn compared LCEC’s vague billing statement to a Duke Energy statement that listed each cost (pole, transformer, wire, etc.) and broken down by labor and material to reach a line-item total.

He also questioned LCEC’s widely different charges for near identical installations. One resident was charged $7,000 while another was charged $10,000, both installations consisting of two poles and a span of wire to a transformer plus undergrounding to the residence.

When the property owners complained, the $7,000 charge was reduced to $1,294 and the $10,000 charge reduced to $4,531.

“Why the difference? We don’t know,” said Ilczyszyn. “They were similar installations.”

He cited another instance where LCEC extended service to a home in 2013 then added three additional poles and wire to the end of the cul-de-sac with no CIAC charges.

“That means the rest of the homes built there will not pay CIAC charges,” he said.

Ilczyszyn cited CIAC charges to the city for Ford’s Boathouse at Cape Coral Yacht Club. LCEC quoted $31,100 to underground a three-phase service at a distance of 300 feet. If the city furnished the conduit in the ground, LCEC would pull the wires for $4,200.

“We paid a contractor $7,200 to put in the conduit and LCEC’s final CIAC charge to us was $6,758,” Ilczyszyn said. “That’s a 60 percent markup in just two months. In the end the city paid less than 50 percent of LCEC’s original $31,100 quote. That’s why we don’t trust this. These are the facts. There should be no winners or losers in the CIAC policy.”

Ilczyszyn also informed council that the city paid more than $302,000 in CIAC charges to run electric to lift stations in the Southwest 6/7 utilities expansion zone.

Councilmember Marilyn Stout voiced concern about the length of the measures the city has taken, especially attorneys’ costs.

“I am wary about our direction and the cost,” Stout said. “My concern is for the ratepayers and taxpayers who are paying the attorney fees on both sides of this issue.”

When pressed for an answer on negotiations, City Manager John Szerlag restated to council that LCEC has suspended negotiations on a new franchise agreement pending the outcome of the city’s complaint filed with the Public Service Commission.

The current 30-year franchise agreement with LCEC expires later this year, but stays in effect past the expiration until a new contract is signed.

In a letter to the city in answer to its petition and complaint, LCEC said its CIAC fees have been actively under review since July of 2015 and the co-op has been has been considering a change in policy since November of 2015. It is set for consideration by LCEC’s elected board next month.

“The change being considered would effectively mirror the CIAC policies of investor-owned utilities that have been approved by the PSC. This issue will be addressed by the LCEC Board of Trustees at its open meeting on May 19,” the letter to the city states. “Thus, we believe it is premature to seek relief from the PSC on this issue while it is under consideration.”