STORY TOOLS

• E-mail story
• Comments
• iPod friendly
• Printer friendly

More Columns

• Guest commentary: Summer is officially over
• Guest commentary: Municipalization; Why not get the facts?
• MICA: VIP treatment in Paradise

Share and Enjoy [?]

Someone wrote: “Buying utility means poor service, power outages, higher rates.”

This is a statement of assumptive conclusion based on opinion and not fact. There are many assumptions that this writer stated as fact that are simply not true.

1. City Council has only asked that an unbiased committee be formed to study to gather information. No decision of purchase has ever been suggested. Information needs to be gathered first to even suggest a conclusion. It is hoped by some that the study would lead to possible long-term agreements with LCEC to reduce electric rates and there would be no need for a takeover of the system. Before a takeover, negotiations with LCEC would have to fail and the public would have to approve such an action through referendum. If such a takeover would occur, the use of sub-contractors like LCEC currently uses and /or Florida Power and Light would be used to insure that there is no loss of service quality. The aim is lower rates not higher.

Because one attended a presentation by LCEC does not mean you have heard all of the facts. You have only heard LCEC giving their side of the story. You know the old saying about the “Fox guarding the Hen House”. Mr. Hamilton was trying to sell the LCEC story and how good they are. Did LCEC do a good job after Hurricane Wilma? Without great assistance from the Marco Island Fire Department and other fire departments, LCEC’s power on Marco would have been in serious trouble and feedback from areas harder hit than Marco during Hurricane Wilma, such as the Everglades City area, indicated some very serious hurricane response deficiencies by LCEC.

2. Although smoke testing has recently been introduced to detect leaks in the City of Marco Island, the city has utilized numerous other methods over the past years to locate and repair leaks.”

3. The $100 million price tag for the electric utility is 70-80 percent over-stated by the writer. Mr. Hamilton stated in his presentation that the cost could be closer to $30 million.

4. I have not heard any City Council member state that there is any eagerness to get control of $5 million per year. I believe that number came from a city consultant as a preliminary estimate in potential savings. Any potential savings would be a substantial means of reducing cost to citizens and could be used to offset ad-valorem/property taxes.

5. It is also important to note that almost immediately after the request for an Ad-Hoc Committee was made, the rumor mills were pushed into action, which generated false and misleading information and/or false conclusions. Opinions, not based on fact, are at best dangerous.

6. Since the calling for a Ad-Hoc Committee by City Council, LCEC went into a defensive stance and requested one-on-one meetings with City Council members, with the city manager and with some members of staff. LCEC then went on to bring their sales story with a LCEC power point sales presentation at the Marriott.

7. Mr. Hamilton, CEO of LCEC did the vocal for the Power Point presentation. LCEC presented a pie chart where everyone was led to believe that the expenses were specific to Marco Island. Later on in the presentation Mr. Hamilton mentioned that he may have been “elusive” with the info since LCEC does not track costs by area and had no idea of what Marco specific costs were.

8. Although there were many questions on the issue of takeover no one cited the City report that recommended:

– That any takeover decision would be made by public referendum that would include a rate stabilization clause.

– That the driving force in reviewing this matter was to try and find alternative revenue sources that could protect future vital services.

9. Mr. Hamilton stated several times when asked about growth related subsidies that “growth expenditures have paid for themselves by the increased revenue associated with such growth.” This is entirely different from LCEC’s bill insert that stated “LCEC has invested more than $250 million in infrastructure over the past three years to sustain growth within our service territory” and that “the proposal for an increase (in rates) came after an independent cost of service study indicated current rate levels would not sufficiently maintain LCEC’s key financial ratios.” In other words growth is not paying for itself and is a continuing reason for rate increases. LCEC also supported the fact that most of this growth investment is not for Marco Island since our electric system is more than adequate for future growth.

15. Mr. Hamilton’s chart (5) showed that electric costs have increased by 26 percent in the past four years and stated, “This was entirely due to the cost of purchased power.” The next rate increase in July brings this increase to 31 percent. In addition, there have been increases in the fixed costs during this period – from $5 per month in July, 2004, to $15 in July, 2008, and none of this has anything to do with cost of power. And the benefit of being an owner of the Co-Op diminished when LCEC cancelled distribution of Equity Checks in 2007.

16. LCEC attempted to prove that Marco is not the densest of their areas by using density as population per square mile (ie “Cape Coral is more dense than Marco”). In understanding electric revenues and subsidization, you must use “electric revenue per square mile” not population density. Marco Island’s larger homes carry a larger home electric load than the smaller homes in Cape Coral.

17. LCEC’s charts showed that the cost of purchased power has been 72 percent and thereby implying that there is only 28 percent of the total cost chart to play with in reducing costs if Marco took over. This 72 percent cost factor was using the costs associated with Seminole’s generation which Hamilton agreed “was economically mismanaged” and forced them to switch to all FPL by the year 2014. He also indicated that the deal with FPL was “substantially better for our customers.” Yet, he continued to use the old Seminole costs in his charts rather than reflecting what the lower cost FPL figures are. This may reduce the percentage of total costs resulting from purchased power and increase the percent of costs that could be addressed that are non-power related. He also didn’t clarify that if Marco owned the system they may be able to get the same good deal from a motivated FPL.

18. The worst disinformation, by far, was Chart 24 where LCEC tries to scare people by making an assumption that the purchase of the electric company would cost the same as the water company ($100 million) and would require an increase of 20 percent in city spending. Hamilton later indicated that the purchase price might be more like $30 million. As he stated, the value of the electric system is a well-defined fact (by law it is replacement cost less depreciation), which would be developed during any follow up study by the city.

19. While we are talking about scare tactics, when asked, if any purchase price would be paid for by dividing the purchase cost by the number of residents, Hamilton indicated he “wasn’t sure.” Everyone should know that, like the water and sewer purchase, municipalization moves are only made if the financing of the purchase price can be paid for by normal rates, not by an allocation to individual residents.

20. LCEC’s comparison charts show their rates to selected munis and investor owned utilities. They should have also indicated that, on average (per muni association Web site), muni electric rates are four percent lower than co-op rates. Hamilton also evaded the comparison to FPL rates. LCEC’s Web site shows that a typical 1,000 kwhr residential customer will be paying 6.3 percent more than FPL rates beginning in July, 2008. In addition, comparison to the overall rates of other munis misses the point of Marco’s situation. It is the possible subsidization issue that is vital. Who knows if these other munis have as many electric usage density variables as exists between Marco Island and the rest of LCEC’s area?

21. On the underground issue, Mr. Hamilton kept stating that they give Marco a credit for what an equivalent overhead system is worth. The point is that they have yet to recognize any cost advantage to them for under grounding and have not been willing to contribute any out of pocket costs to the project (compare this to FPL’s policy on their Web site of a 25 percent contribution and to the Naples 28 muni coalition effort to get FPL to raise this to up to 50 percent).

22. Mr. Hamilton indicated that they want us to stop proceeding with the study since “they are concerned about costs to Marco Island.” This is the same company that has taken $380,000 from us for design of the underground, has increased the cost of underground by 400 percent since 2004, and has recently asked us for an additional $40,000 to redesign the pilot area for a more reliable design.

With all this said, it should give enough credence as to why consideration should be given to an Ad-Hoc Committee’s independent review of the facts.