FPL provides reliable, affordable service
By Bob Coleman, FPL external affairs manager
For Hometown News
For more than 80 years, Florida Power & Light Company has served the residents of South Daytona with reliable, affordable electric service. Before the city considers purchasing the electrical system from FPL, its officials should give serious consideration to the challenges of effectively running an electric utility for the residents of South Daytona.
South Daytona officials have said that taking over the electric system is feasible. That is not the same thing as saying it will be affordable. There are no success stories when it comes to a city-owned utility in Florida efficiently and cost-effectively running a utility. In fact, only one city – Winter Park – has taken over its electric utility since the 1940s.
Unfortunately, as a recent article in the Orlando Sentinel put it, Winter Park’s finances were found to be "overall unfavorable, most significantly because of the shortfall accumulated since the city bought the electric grid from Progress Energy" (one of the state’s investor-owned utilities) in 2003. Since that time the city-owned electric utility has accumulated an $11.6 million deficit, and Fitch Ratings has placed a "Rating Watch Negative" on Winter Park’s electric revenue bonds due to concerns with the utility’s debt service coverage.
The bottom line: Winter Park’s electric bills are now among the highest in Florida.
Winter Park thought running an electric utility would be simple and that the city could do it cost effectively and efficiently. It projected 2009 rates to be 9.5 cents per kilowatt hour. That projection did not prove to be accurate. Current rates are more than 13.5 cents per kilowatt hour. Winter Park customers pay nearly 26 percent more for electricity than FPL customers pay, based on a typical 1,000 kilowatt hour electric bill. This disparity may increase to nearly 32 percent with FPL bills projected to decrease by 4.5 percent in January of next year.
FPL’s bills are already 19 percent lower than the average electric bill in Florida, and when compared to just the 33 municipally owned utilities in the state, they are 20 percent lower. In addition, FPL bills are 6 percent below the national average, even as FPL has made investments to make the company one of the most efficient and cleanest energy generators in the United States.
FPL also is investing to make our infrastructure stronger every day, in good weather and bad. As a result, FPL’s distribution system performance was the best ever in 2008, with our customers enjoying system reliability 47 percent better than the national average. In 2009, FPL will invest an estimated $48 million on distribution reliability programs aimed at further reducing customer outages through aggressive preventative maintenance projects on our overhead and underground facilities. Investments like these will be difficult for a city-owned utility coping with start-up costs.
If city officials truly want to purchase and run the electric system, the cost to the citizens of South Daytona would be between $17 million and $22 million. For the typical electric customer, bills would rise between 10 percent and 30 percent.
These estimates exclude the risks associated with purchasing electricity if the city took over the system. The wholesale price of purchasing electricity would make up about 70 percent of the cost associated with South Daytona’s operating a utility. Predicting the wholesale cost of electricity five years from now is a difficult task, with electricity prices constantly fluctuating due to market demand.
FPL is committed to negotiating with the city of South Daytona in good faith, and we are hopeful that an agreement can be reached that will permit FPL to continue to provide electric service to the city and its residents. Benefits to the city include as much as $1.5 million more in franchise fees over the life of the new franchise than under the current agreement. Perhaps most important, the residents of South Daytona would continue to receive the affordable, reliable electric service that they have come to expect from FPL.