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No cause to celebrate

June 9, 2017
Cape Coral Daily Breeze

The city of Cape Coral, "in the spirit of co-operation," has dropped its Florida Public Service Commission complaint and will again begin franchise negotiations with LCEC.

The complaint, which asked for an investigation into the rate structure of the electric co-operative, was withdrawn "with prejudice" in advance of a long-awaited FPSC staff recommendation expected this month, meaning it cannot be re-filed.

We'd offer some qualified kudos but the city action comes days late and dollars short -more than 447 days late and $1,266,182 in various invoices short, to be exact.

Most of these expenses bourne by Cape taxpayers and ratepayers are a result of the city prioritizing litigation via its filing with the FPSC on March 15, 2016.

And it's mostly money in the wind.

For despite the numerous allegations and legal filings predicated on the city's premise that ratepayers within its municipal borders "subsidize" ratepayers in other areas of the electric co-operative's five-county service area and so are entitled to separate - and lower - rates, the city has come back to the table with that core finding, well, apparently no longer at issue.

LCEC has been abundantly clear that it rejects the "subsidy" argument and that an area-specific rate structure "goes against the very foundation upon which cooperatives - and indeed, all Florida electric utilities - operate."

The FPSC was the city's best, albeit slim, shot.

Also apparently gone with the wind is the city's plan to possibly buy LCEC assets to become a municipal electric services utility, something officials once said could be done for less with upgraded amenities such as underground lines and LED street lighting thrown in.

To call this "dual track" franchise vs. municipalization exercise a waste of time and money would be an understatement.

Now, the city directs any umbrage at this outrage toward the co-op, which, city staff - despite its new "spirit of co-operation" philosophy - maintains should have been working with the city on a new franchise agreement all along.

In its memos to City Council recommending the complaint be dropped, staff points out the city placed a franchise agreement on the table for LCEC consideration on March 9, 2016. That proposal, a counter to LCEC's "boilerplate" document that essentially mirrored the 30-year agreement set to expire, contained a myriad of new terms identified by city staff and individual council members.

City staff also says that LCEC did not provide critical "cost of services" information needed as they also explored the "dual track" of acquiring the co-op's in-city infrastructure, which the city, interestingly enough, maintained was already owned by the municipality and Cape ratepayers.

Lastly, LCEC refused to negotiate as city staff wished while the FPSC complaint was pending, thus breaching the terms of the original franchise agreement

LCEC rejects these staff and legal arguments point by point saying "LCEC made it clear to the City before the City initiated the FPSC litigation that negotiation could not sensibly proceed during the litigation process;" that it would have been fiscally imprudent to ratepayers to pay concurrently for both negotiation and litigation; and that there was no breach of the expiring contract because 1) "its terms could not be enforced in perpetuity," once expired and 2) the co-op continued to pay the city the franchise fees due in the wake of the lapse.

Despite the continuing contretemps, we are glad the process is starting anew as it has cost far, far too much.

LCEC's expenditures to date in this now back-to-square-one fiscal fiasco are estimated at $800,000 for consulting and legal fees related to a new franchise agreement, municipalization and the FPSC complaint.

These expenditures will be absorbed by every ratepayer writing a check for an LCEC electric bill.

The city has expended at least $466,182 - $27,000 for its initial feasibility study to see if municipalization of the co-op's assets was financially feasible; $49,500 for the special negotiator who met with LCEC on a new franchise agreement during one of the lulls in the FPSC action; $351,682 in legal fees as of June 1; and $38,000 for accounting services thus far with more pending.

These expenditures will come out of the pocket of every city taxpayer, including those among the 82,000 LCEC ratepayers in the Cape who get to pay twice.

Why do we say this is too much?

Two reasons.

First, to put things into perspective, it took less than 30 days for LCEC and Lee County to reach an agreement on a first-ever franchise agreement in 2014.

That agreement is pretty much on par with the 30-year-old contract that expired in Cape Coral late last year and pretty much on par with these types of agreements in general - the establishment of a franchise fee to be paid by the utility in exchange for using publicly owned rights of way.

It addressed nothing comparable with the terms the city of Cape Coral put on the table - a sort of joint-operating statement that would have required LCEC to establish special rates and business practices in exchange for providing services within the city limits.

Second, right now, with $1.27 million spent and the added expense of innumerable staff hours that neither side has tracked unaccounted for, Cape taxpayers and ratepayers - who once were told by this city's administration and by this city's elected officials that costs and possible cost savings were driving the need for studies, filings, confabs and consultants - have only bills to show for the effort.

In the private sector, a simple cost-benefit analysis would likely result in resignations or terminations.

Here in the Cape, expect salutations when the franchise agreement that should have been hammered out more than a year ago is finally reached.

While we will be happy to see an accord - and certainly hope that the city ekes out a concession or two when it is - we will not be among those praising the path that got us there.

There likely will be very little in this oversold boondoggle to outweigh all the cost and effort exerted.

-Breeze editorial



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