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Negotiations to begin anew with co-op

By Staff | Jun 8, 2017

With at least $1.27 million spent between the city of Cape Coral and the Lee County Electric Cooperative, both parties are back to square one in negotiating a new franchise agreement.

On Monday, the Cape Coral City Council voted to withdraw its Florida Public Service Commission complaint against LCEC “with prejudice” – meaning it cannot be refiled – and return to negotiations, rather than face the possibility of delaying the negotiations indefinitely for a cost of service analysis.

The previous, standing franchise agreement between the city and LCEC expired in October.

“Our goal has been and always will be to make sure that Cape Coral customers have the best electric service that we can achieve,” Connie Barron, the city’s spokeswoman, said on Thursday.

“It’s always been what the best option for the community,” she added.

Karen Ryan, LCEC’s spokeswoman, said the cooperative is ready to start the discussions.

“We are eager to begin negotiations, now that the city has withdrawn its PSC complaint,” she said. “It is our hope that we can now engage in constructive negotiation toward a new franchise agreement.”

As of Thursday, the city had spent $466,182 on the issue. About $27,000 went to Spencer Consulting for the initial feasibility study a few years ago, $49,500 to Stuart Diamond on negotiations, $351,682 to Brian Armstrong for the legal fees, and $38,000 for auditing services from Ashpaugh & Sculco CPAs.

LCEC’s total costs were approximately double.

“LCEC has expended in the order of $800,000 for consulting and legal fees related to reaching a new franchise agreement, municipalization and the FPSC complaint,” Ryan said.

Council Member Marilyn Stout expressed support for the council’s vote from Monday.

“I am very happy that we’re moving forward,” she said, adding that the move is about a year late.

“The only winners in what has gone on the last year have been the attorneys for both sides, and now that’s coming to an end,” Stout added. “Now our residents are going to come out the winners.”

As of Thursday, officials from both parties had yet to sit down or set a meeting date.

“The city manager is going to continue his discussion with the representatives from the Council for Progress,” Barron said, noting that LCEC Chief Executive Officer Denny Hamilton will also take part.

“It may take a little bit of time to work out the terms and work out an agreement,” she added.

Ryan explained that the parties are figuring out their schedules.

“We are working through scheduling and hope to begin negotiations very soon,” she said.

“I know that the city’s anxious, too, to get things moving along,” Ryan added.

During previous talks, members of the Council for Progress have acted as intermediaries.

“With the Council for Progress’ help, we have developed a framework for future negotiation and areas for potential agreement,” Ryan said.

Barron noted that the Council for Progress will also provide insight.

“They will provide input and feedback as to what they believe would be reasonable terms for a franchise agreement,” she said.

According to Barron, the city and LCEC will have to identify their common ground and what specific terms they can agree on. A list of terms previously put forward by the city is no longer on the table.

“It’s not that long list of terms that the city proposed before,” she said. “Those have been paired down into some priorities that the city manager and, perhaps, city council has wanted to see.”

Stout noted that she saw a listing produced by the Council for Progress.

“I didn’t find it objectionable,” she said.

“It’s certainly different than what the city presented to LCEC in March of 2016,” Stout added.

The city’s exploration into the municipalization of its services is also over.

“That is off the table,” Barron said.

According to Stout, some citizens voiced concern about the city taking over the utilities.

“The concern was that if the city was handling the rates, they might decide to raise rates for other reasons,” she said.

“I think most people are happy with LCEC,” Stout added.

As for the possibility of separate utility rates for the Cape, it is unlikely.

“The idea of different rates by geography goes against the very foundation upon which cooperatives – and indeed, all Florida electric utilities – operate,” Ryan said.

She noted that LCEC has been serving Cape Coral for nearly 60 years.

“Our employees live and play here,” Ryan said. “We support the community economically, through volunteerism and through civic involvement.”

“We are eager to find a solution in the best interest of our members and Cape Coral citizens,” she added.

The city and LCEC have been attempting intermittently to reach a new franchise agreement since before the 30-year-old one expired. In March of 2016, the city filed the PSC complaint against LCEC after unsuccessfully attempting to obtain financial information regarding the cooperative. LCEC said the information sought did not exist in any compiled form.

The city then put the complaint on hold in June of 2016, only to reinstate it in November.

The complaint asked the PSC to order LCEC to conduct a cost of service analysis for its rate structure and rate design to determine if it was equitable to Cape’s residents and businesses. The city maintained that the ratepayers within the Cape were subsidizing ratepayers in other areas of LCEC’s service areas.

According to Barron, City Manager John Szerlag dismissed the complaint with prejudice as a good faith offer. LCEC had declined to participate in negotiations while the complaint was on the table.