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Municipal power for Belleair: Risky business or opportunity?
By CHARY SOUTHMAYD
Article published on Thursday, Nov. 3, 2005 |
BELLEAIR – The decision facing voters in this town of 4,100 is simple enough – either continue to be a customer of Progress Energy, as has been the case for 75 years, or break away from the investor-owned utility and let the town take over providing electric service, while benefiting from the profits.
The emotionally charged debate over whether such a venture is too risky or simply sound business practice will culminate in a Tuesday, Nov. 8, referendum when residents make the call.
Early voting began Oct. 24.
Mayor George Mariani Jr. leads the charge among those who have no doubt whatsoever that the town can get the job done.
Asked by a citizen at the town’s Oct. 27 information meeting, “What if it doesn’t work?” the mayor replied, “I am 100 percent confident it is going to work.”
Those who feel otherwise have printed fliers and written letters to the editor advising residents “Don’t be fooled,” and claiming that public power is “risk, risk and more risk.”
Progress Energy representatives Dale Oliver and Gail Simpson came to the town meeting armed with that same message. Oliver advised residents to consider the responsibility, risk and reliability involved in running an electric utility.
“This is what we do. This is what our people live for,” Oliver said.
“Reliability is excellent in Belleair,” said Simpson.
Among the nearly two dozen Belleair residents who addressed the meeting was Tom Olson, who challenged Progress Energy’s claim of reliability, citing several recent outages in his neighborhood that occurred “for no apparent reason.”
Resident John Hail, an electrical contractor, called Progress Energy’s aging Belleair distribution system “third world” and demanded to know what Progress Energy will do to improve the system.
“We change items as need is,” said Oliver. “As far as any wholesale change-out to the system, I can’t promise there will be any activity in that direction.”
The contentious relationship between the town and Progress Energy dates back several years, involving who should pay for aesthetically pleasing utility undergrounding and what the mayor calls “breach of contract” and “breach of public trust” regarding PEF’s refusal to honor a contract clause allowing Belleair to buy the utility’s poles and lines at the end of the 30-year agreement. That battle wound up in the Florida Supreme Court.
“How can you trust someone who will breach a deal?” asked one resident, a comment that prompted Oliver to defend his company’s ethics.
There are 33 municipal-owned utilities in Florida. Winter Park, a city considerably larger than Belleair, is the most recent to unplug from Progress Energy, launching its own service June 1.
“It has been a heck of a first four months ... not all rosy,” said Randy Knight, Winter Park’s assistant city manager. “We had problems, but response was quick ... nothing that can’t be overcome. This comes down to a business decision. Scare tactics don’t matter.”
Winter Park anticipates completion of its undergrounding in 20 years, Knight said.
Mariani estimates undergrounding could be done within 10 years in Belleair.
Commissioner Stephen Fowler told residents, “We need to take the bull by the horns for ourselves. We have the opportunity of a lifetime and we ought to take it.”
Commissioner Bonnie Ruggles noted that much of the town’s infrastructure needs extensive work, with no funds readily available to cover the costs. Proponents of public power cite the availability of its profits as an additional revenue source for the town.
“I would rather see profits go to the town of Belleair,” said Commissioner Tom Shelly.
Edison Electric’s Bill Brier, appearing on behalf of Progress Energy, warned of volatile energy costs facing utilities that could drive up customer rates.
Unlike Progress Energy, public utilities’ rates are not regulated by the state. Rates are set at town hall, where local officials are held accountable.
Brier also warned of risks associated with isolation from a larger network.
“If you create an island, you run the risk of reducing flexibility,” Brier said.
“Don’t let Progress Energy scare you into thinking this is a risky opportunity,” said Jim Harrison, leader of the group Power to the People. “We can keep renting a crumbling system or we can be proactive.”
If Belleair votes for municipal power, the town would not be generating its own electricity, but rather purchasing and distributing it to customers. The consulting firm WHH Enterprises has recommended the town negotiate with Progress Energy for bulk power supply and contract with Coastal Electric Maintenance and Construction to run the electrical distribution service.
The town would borrow an estimated $9 million from a state bond pool to finance the utility start-up. Eventual profits would go in to an enterprise fund for, “undergrounding, reducing taxes or rates, whatever we ... you, decide,” Mariani said.
As part of the Florida Municipal Electric Association, Belleair would be part of a mutual aid network in which other municipally owned power companies in Florida and elsewhere come to one another’s aid in the event of a disaster.
“Municipal electric utilities have an outstanding response to storms and hurricanes. We have a statewide mutual aid agreement, as well as with 2,000 municipal utilities across the country,” said FMEA’s Barry Moline. “This is not rocket science. If Bushnell can do it, Belleair can do it. From my experience, cities benefit from keeping profits in their town. This is about local control.”
Whether or not the long-term benefits of municipal power outweigh the potential risks of such a start-up venture is ultimately up to Belleair voters to decide.
“Running a utility is not an easy thing,” cautioned Oliver. “It keeps me up at night.”
“Belleair has demonstrated that this business plan is financially feasible and the risk is manageable,” said Mariani. “In the end, the citizens of Belleair will have control of their own destiny.”
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Article published on Thursday, Nov. 3, 2005
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