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Council needs to define utility goals

November 18, 2016
Cape Coral Daily Breeze

Talks between the city of Cape Coral and its electric services provider, LCEC, have hit another roadblock.

After more than two dozen meetings and phone discussions over the last five months, little progress has been made in the joint effort to hammer out a new franchise agreement to replace the 30-year-old contract that has expired, officials on both sides agree.

This latest effort began in May when the city hired a professional negotiator, Stuart Diamond, after a first-round effort between the city and the electric co-op dragged for months. There was little movement and that non-effort concluded with a contentious rate challenge filing by the city with the Public Service Commission, alleging that ratepayers within the city "subsidize" LCEC customers in other parts of its service area.

It was hoped franchise negotiations would begin in earnest. Council agreed to spend up to $49,500 on the renewed effort, expending $43,945 on specific services that included, according to billing invoices to date:

- $8,000 for emotion reduction

- $1,500 for expenses

- $5,000 for information development

- $4,000 for strategic planning

- $8,100 for media message/media/PR

- $8,000 for stakeholder coalition building

- $8,345 for negotiation

We'll not fault Mr. Diamond for lack of the hoped-for "beneficial outcome." When you're handed an anvil, no amount of alchemy is going to change it into a golden ingot.

For make no mistake, a two-ton dead weight - forged with 1) the preferred, ahem, parallel position that the city can provide cheaper and better service if it executes a contract clause to "municipalize" or purchase LCEC's operations in the city and 2) an adversarial approach out of the gate - is exactly what Mr. Diamond was given.

What the taxpayers were handed was a bill for an effort, no doubt executed in good faith, that nonetheless was doomed to fail for it is not really a franchise contract the city wants to reach, but a joint operating agreement that would require LCEC to change the way it does business.

That is not going to happen.

Let us repeat and let us be specific: That is not going to happen. LCEC, a non-profit co-operative with customers across five counties, is not going to create the utility-within-a-utility the city wants. Its elected board of directors, answerable to all of its members, simply are not likely to allow it, even if the state - which prohibits the creation of special "classes" of customers - were to give its OK.

Let us recap what a utility franchise agreement is - and is not.

Franchise agreements are not contracts for services, per se, nor are they "permissions" granted by municipalities or counties to allow utilities to provide services within their boundaries. Utility service areas are determined by the state; franchise agreements are a local option.

Simply put, a franchise agreement is basically a contract between a city or county and a utility that gives the utility the ability to use the entity's rights-of-way for infrastructure, in this case such things as lines and poles. In exchange, the government gets a "franchise fee."

Right now that fee, paid by LCEC customers in the city since 1986, is 3 percent. That is in addition to the city's 7 percent "public services tax" levy.

What the city placed on the table in March was a proposed 20-year agreement far more encompassing than a typical franchise agreement.

Its counter to LCEC's "boilerplate" redux contained more than two-dozen points, concentrated this go-around into three target areas: Rates, specifically that the rates within the city reflect "the true cost of service;" equity membership and when that customer equity is returned to members, i.e. ratepayers who are members of the co-op; and franchise terms to "ensure a cooperative partnership in the future" with greater transparency. Also discussed was a new nuance, the city's desire to own, instead of lease, its street lighting.

So where are we?

Mr. Diamond provided the city with a succinct summation:

"In sum, after negotiating for five months, I have concluded that LCEC is not at this time prepared to make the kind of significant concessions to meet the city's wishes in a time frame that the City considers meaningful. I believe that the relationship with (CEO) Dennie (Hamilton) has been cordial. But there seems to be a mismatched sense of urgency on the part of the utility as compared with the City. I believe that if LCEC had a greater sense of urgency, or will, or both, we would now be farther along."

Or not.

In response to perceived delays and the city's decision to go back to the PSC, LCEC has now set a deadline of its own, giving the city six months to exercise the right-to-purchase clause in the franchise agreement that expired last month.

"Urgency" - and any lack thereof - apparently, depends on where one stands.

And going on two years after the process began, the parties still stand miles apart, the city focused on "significant concessions" and a "cooperative partnership;" LCEC on a standard franchise agreement.

Negotiation is not likely to budge these entrenched positions.

Litigation will cost Cape taxpayers/ratepayers twice as they pay for both sides to battle it out.

What is needed, now, is a detente, and that needs to come from the Cape Coral City Council.

Like far too many projects, this one has strayed significantly from council's stated objective of pursuing the dual tracks of purchase vs franchise renewal.

Instead, the city is pattering along the parallel paths of do-it-our-way or the highway and wondering wide-eyed as to why such uncharted ground has led into the weeds.

It's time for a Council-initiated evaluation of where we are, and a re-evaluation of goals and objectives.

Among the questions to be asked - and answered:

- Is Council interested in pursuing a franchise agreement? If not, it's time to stop the charade. If so, perhaps it's time to consider mediation.

- Is a board majority still interested in municipalization? If so, is the board willing to spend the buckets of bucks needed to continue to explore that option? If not, refer to the last question.

The tax-paying, rate-paying public deserves some clarification. Provide it before another hour, or another dime is spent.

- Breeze editorial



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