Is a Municipal Electric Utility Right for the City of Sarasota? Barry Moline, Executive Director Florida Municipal Electric Association P.O. Box Tallahassee, FL (850) , ext. 1 June 2010

2 Public Power in Florida 34 municipal electric utilities (of 400+ cities) 3 million Floridians (15%) Large & Small –JEA: 409,000 customers –OUC: 198,000 customers –Moore Haven: 984 customers

3 Florida Municipal Electric Association Legislative & Regulatory Training News & Information – Public power advocates

4 Bias? FMEA’s 34 members pay dues –Fund about 2/3 of association operations Sarasota, if you were to become a member, would pay about $25K in dues –Represents 2% of association budget FMEA Board of Directors established policy on creation of new municipal electric utilities: –Provide information to interested cities –Stay objective – Do not be Pro or Con –Support that accurate information be used in decisionmaking

5 U.S. Electric Utilities

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8 Florida’s Public Power Utilities  Winter Park

9 U.S. Electric Utilities ResidentialCommercialIndustrial Publicly Owned9.9 cents9.2 cents6.7 cents Cooperative Private *Revenue/kWh, U.S. Department of Energy, Energy Information Administration, Form EIA-861, Rates/kWh*

10 Florida Electric Utilities ResidentialCommercialIndustrial Publicly Owned12.0 cents10.6 cents8.2 cents Cooperative Private FPL *Revenue/kWh, U.S. Department of Energy, Energy Information Administration, Form EIA-861, Rates/kWh*

11 Florida Electric Utilities All Rates Averaged (Res, Com, Ind) Publicly Owned10.8 cents Cooperative10.9 Private10.7 FPL11.0 *Revenue/kWh, U.S. Department of Energy, Energy Information Administration, Form EIA-861, Rates/kWh*

12 FMEA Rate Chart April 2010 *

13 Cooperative Rates April 2010

14 Electric Utilities’ Philosophy PublicPrivateCoop Locally owned  Consumer owned  Consumer governed  Profit to: stockholders  members  members  community  community  Collect & pay taxes  Open meetings, records  Public accountability 

15 Reliability Source: Florida Public Service Commission, Florida Municipal Power Agency Reliability Project Average annual outage length for each customer served. SAIDI = # minutes of all interruptions total number of customers served

16 Reliability Number of minutes each customer is out of power during an outage. L-Bar = minutes of interruption total number of outages Source: Florida Public Service Commission, Florida Municipal Power Agency Reliability Project

Winter Park Reliability MAIFI - Momentary Average Interruption Frequency Index “Blinking Clocks Index”

18 Hurricanes and Emergencies Mutual Aid FMEA and APPA members agree to assist each other during storms Immediate response Hurricane Seasons –Hundreds of Crews assisted from across FL and the US

19 What’s Inside a Utility Bill? Utility bill has 3 parts: TransmissionGenerationDistribution Generation Generation = about 65% of bill Transmission Transmission = about 10% of bill Distribution Distribution = about 25% of bill

Transfer to general fund Generation & Transmission Power supply contract or self generation City distribution costs (local poles & wires) Breakout of Electricity Costs City provides line crews and billing City contracts with wholesale power provider City provides power and distribution on one bill.

21 Is There “Cost Competition” Today? Utilities compete at wholesale for generation today, buying and selling to each other. Most sales are for large quantities. Individual customers not allowed to purchase power separately

22 Electric Municipalization City purchases local poles & wires. –Issues bonds to purchase system. –Maintains with own crew or contracts out. Purchases power on wholesale market. Barriers –FPL not eager to sell. –Stranded costs. –Legal, political battle.

23 Municipalization benefits: Why are you here? Save $ for businesses & consumers? Excellent customer service & satisfaction –Why? Commission is Regulator; demands action –A lot easier to call local elected officials, city manager or utility director than the CEO of a large utility Excellent reliability More efficiency, renewables More underground wires – –you pay, but you own… Faster response during outages $ stays in community ?

24 Municipalization drawbacks Politics can influence operations –Transfer to general fund impacts rates Some cities have relied on their electric revenues to “balance the budget” –Operations, training budget can be cut to stay in line with other municipal departments –Rate increases may be perceived as politically unfavorable –Importance of staying abreast of legislative and regulatory changes

25 Difficult Choices: Weighing the Pros & Cons What is most important to you? –Rates? –Reliability? –Efficiency, Renewables? –Undergrounding? –Storm response? Cost will probably be about the same in the long run

26 Is this complicated? Heck Yes! Long road ahead: –Purchase poles & wires –Legal battle –Engineering expertise –Political battle

27 Is this complicated? Heck No! Not rocket science: –If 2,000 cities can do it, so can we! –We have good lawyers. –We have engineers –If it’s a good idea, the politics will be obvious.

28 Do you need to build a power plant? NO!!! City would buy power on the wholesale (bulk) power market for all local customers. This is extremely common: more than half all municipal electric utilities in the U.S. buy power this way. Cost is similar, but market is not very liquid. Contracts typically years

29 Do we need to hire staff or can you contract this out? Winter Park chose to contract out for 5 years –Learned how to operate in first 5 years –Considering bringinng operations in- house; continue to analyze savings –Initially considered but rejected using neighboring utility, OUC, for operations In-house saves some money, but contracting allows easier transition

30 Recent Experience… Who’s interested? Dunedin –Reliability, undergrounding –Decided No Belleair –Reliability, undergrounding –Referendum: 46 Yes, 54 No Casselberry –Reliability, undergrounding –Decided No Winter Park –Reliability, undergrounding –2005 Referendum: Yes (69 Yes, 31 No) –Rates remained same before vs. after purchase

31 Recent Experience… Who’s interested? South Daytona Beach (FPL) –Hurricane restoration, undergrounding –Considering Ft. Lauderdale (FPL) –Hurricane restoration, undergrounding –On hold Marianna (Gulf Power) –High rates –On hold Cocoa Beach (FPL) –Hurricane restoration, Undergrounding –Considering

32 Recent Experience… Who’s considered selling? Sebring – Sold in early 1990s –Purchased unnecessary generation Tallahassee, 2000, Decided No Homestead, 2004, Decided No Green Cove Springs, 2006, Decided No Mt. Dora, 2009, Decided No Vero Beach, 2010 –Discussing ?

33 The road ahead The road ahead Community, City Commission discussion. Studies: –1. Preliminary ($25-100K) –2. Detailed engineering ($250K) Franchise expiration with buyout clause –Once in a lifetime opportunity? Determine price: –Negotiation, mediation Legal action: Courts No regulatory body approval needed (PSC or FERC)

34 Big Issues – The Future No big issues that impact only municipals compared to coops or IOUs Everyone concerned about power supply costs and addressing climate change Power supply will become “greener” (less coal) and more expensive, no matter who owns the poles and wires Responding to hurricanes, maintain storm hardening investments Energy efficiency and renewable energy growing –But investment requires $ Nuclear is a hedge against climate change, and can raise costs. However, depending on the pace of climate change, it’s a cost that may be unavoidable –Some munis investing in nuclear, some just a little, some not at all

35 Lessons Learned from Buy and Sell Debates Take issue seriously Define reasons why you want change Do not expect lower rates Expect accountable operations Expect more efficiency and renewables Expect more undergrounding –But at a cost Expect excellent reliability Expect BIG responsibility –Cities with electric utilities have a strong customer service mindset Expect high industry standards for operations, training, management and governance

36 Perspective 100-year decision...

37 Conclusion Study your options Honestly lay out costs, benefits Due diligence vital Decision may be more qualitative than quantitative –Quality of life vs. Cost impacts Referendum may be appropriate, but… –Elections are VERY political and emotional –Not always the best forum for decisionmaking, especially on a major economic issue like this Work to understand the issues that are facts and those that are opinions.