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Council taps mayor to spearhead new LCEC franchise talks

By Staff | Jun 19, 2018

The Cape Coral City Council decided Monday it would prefer to make another attempt to reach a franchise agreement rather than file a lawsuit or face another three-plus years without a pact with its electric utility provider.

The elected board voted 7-0 to have Mayor Joe Coviello and city staff sit down with officials with LCEC and try once again to hammer out a long-term agreement that is palatable to the city.

The hope for city council is that the contract impasse can be resolved and that a shift from an adversarial to a more collaborative approach will result in a change in tone on their side.

The vote came after the city’s special utility counsel Brian Armstrong gave a presentation with some options for council consideration: either buying LCEC’s assets and flipping them to FPL, or going straight to FPL for services.

Armstrong argued that FPL has better rates, provides better overall service, had the power back on at a better rate after Hurricane Irma and is more committed to technological changes than LCEC.

He also said that FPL has always been interested in buying out LCEC, which would result in a financial bonanza for the city in regards to return of customer equity and reduced rates, which he projects would be more than $369 million over 30 years.

Either route, though, would likely result in a lawsuit, with taxpayers, who are also ratepayers, paying for costs incurred by both sides if the city and LCEC prepare to square off in court.

Councilmember Marilyn Stout addressed the litigation issue head on, saying she believed Armstrong was gunning for a lawsuit so he and all the attorneys involved could get paid even more. She said she supported the negotiation efforts made by two volunteer facilitators with the Cape Coral Council for Progress, which earlier this month submitted a new proposed franchise agreement with the electric co-op for council consideration.

“I trust Brian Rist and Joe Mazurkiewicz, I’m not sure I trust you. You have everything to gain by continuing this case,” Stout said. “We’ve spent over $700,000 on this case; that money should be in our pockets.”

Councilmember Dave Stokes said he was bothered by LCEC rejecting the original contract proffered by the Council for Progress and that binding arbitration might now be the way to go.

Mazurkiewicz conceded the latest effort might not accomplish everything the city wanted, but the proposed agreement and companion memorandum of understanding likely are the best the city can achieve without a lawsuit, something he does not recommend.

“It wasn’t the best deal, but it was the best deal we could get,” Mazurkiewicz said. “The public is on the side of LCEC and to think the city would spend public dollars to buy and flip LCEC’s assets is folly.”

The latest franchise agreement hammered out by the Council for Progress and LCEC and submitted to the city calls for a 30-year term that provides:

* A continuation of the city’s current 3 percent pass-through franchise fee with an option for the city to increase that fee to 4.5 percent in years two to five and to 6 percent after five years. City adoption of any increase in the fees passed on to Cape ratepayers via their electric bills would require a public hearing and Council approval.

* An audit of franchise fees collected within the city’s boundaries once every five years with an annual audit of fees from any newly annexed areas.

The companion memorandum of understanding addresses customer rates, reliability standards, the rate paid for street lights by the city and the sharing of construction schedules and tree-trimming plans.

The proposed memorandum also would create a new technology workgroup to include members from the city, LCEC and the Council for Progress or other business organization; provides that LCEC would maintain a presence in the city’s Emergency Management Center when the center is activated; and calls for a non-disparagement clause for both parties.

It also eliminates the city buyout option contained in the previous, and now expired, 30-year franchise agreement.

According to an analysis of these terms Armstrong sent to City Manager John Szerlag on May 24, the city would lose its right to purchase, lose previously proposed reasonable rates requirements, provide for inferior audit rights, provide no commitment to improve service reliability and would not provide for bulk rates for street light charges which would provide for “significant taxpayer savings.” The proposed length of service for the new agreement that increases the previously proposed 20-year term to 30, and the elimination of the purchase provision, carry a heavy downside, Armstrong said.

Stout made a motion to accept the franchise agreement presented, saying it’s been more than three years and constituents want the city to end the debate.

She then withdrew that motion, agreeing with Stokes to have the mayor and city officials get together with LCEC CEO Dennie Hamilton and co-op officials to try to reach an accord.

LCEC is optimistic.

“We were hoping that the result would have been an agreement, but we are still happy the mayor and city council are willing to continue to reach an agreement,” LCEC spokesperson Karen Ryan said by phone Tuesday. “It was positive that they seem to be willing to keep moving forward and this is the closest we’ve been in three years.”

There are things the two sides agree upon and things they can negotiate, she said.

“There has already been give and take on both sides. It’s just a matter of providing information to provide a better understanding,” Ryan said.

As part of the Council for Progress’s due diligence in the negotiating process, Mazurkiewicz said he reached out to FPL to weigh any interest in acquiring LCEC assets within the city or otherwise expanding its service area to become the Cape’s electric utility provider.

As the Council for Progress reported, FPL on Tuesday said the utility has a long-standing relationship with LCEC, which buys the power it distributes throughout its service area from FPL at wholesale, or bulk, rates.

FPL is happy with that relationship and is not looking to make a change, FPL spokesperson Sarah Gatewood said in a telephone interview.

“We intend to honor that agreement, and we are not looking at any alternative agreements at this time, either with LCEC, the city or any other entity,” she said.