SUBJECT/RECOMMENDATION:
Title
Approve a feasibility study with NewGen in a not-to-exceed amount up to $504,000.
Body
SUMMARY:
Every ratepayer in Florida receives electricity from one of three distributors: either the electric utility is municipally owned, or it is an investor-owned utility (IOU), or it is a non-profit electric cooperative. The Public Service Commission (PSC) grants each utility, regardless of ownership, a monopoly to serve as the sole distributor of electricity within a given service area. Water utilities and natural gas utilities operate in a similar way.
To enable private IOU’s to access, and often excavate, the public right-of-way, IOU’s typically enter into franchise agreements with local governments. These agreements can be customized in several ways, including provisions relating to franchise fees, tree trimming, and municipal buy-out’s of the IOU. Many franchise agreements also prohibit the city or county from creating their own utility during the term of the agreement.
In December 1995, the City granted a 30-year electric franchise to the Florida Power Corporation. Florida Power was a Florida company. However, the franchise agreement allowed Florida Power to freely assign and transfer their rights to different entities. In the years that followed, Florida Power was acquired by Duke Energy, a publicly traded North Carolina company. Duke Energy has provided local electric service since 2012.
City staff are aware of local media interest involving Duke Energy. For ease of reference, staff has provided Council with a list of local stories.
As the 30-year franchise nears its conclusion, it is time for the City to consider the future of electricity in Clearwater. For a variety of legal and technical reasons, it is unlikely the City will be able to join a non-profit cooperative such as the Withlacoochee River Cooperative, which services much of Pasco County, or the Peace River Electric Cooperative, which services much of Manatee County.
However, the City does have the option to provide electric service directly to Clearwater residents and businesses, similar to the way that Clearwater operates its water and sewer utility and the Clearwater Gas Company (CGS). If Clearwater elects to municipalize, it will join 33 other municipally owned electric utilities in Florida. Examples of varying population sizes and topography include Bartow, Jacksonville, Key West, Lakeland, Leesburg, New Smyrna Beach, Ocala, Orlando, Tallahassee, Wauchula, and Winter Park. Alternatively, Clearwater can sign a franchise agreement with Duke Energy.
To make an informed decision, staff recommends NewGen Strategies & Solutions. NewGen brings decades of experience interacting with electric utilities, and the credibility of recent studies recommending municipalization (e.g. San Diego) and studies recommending against it (e.g. Chicago). The cost of the study, which will not exceed $504,000, equates to 4.8% of one year of franchise fees the City receives from its franchise agreement. The study costs will be paid through available special program funds. If approved by Council, NewGen will advise the City as to the infrastructure needed and probable costs. If municipalization proves financially wise for both the City and for ratepayers, NewGen will offer a sensible process map that recommends a seamless transition for customers. In addition, the study, in collaboration with City staff, will endeavor to answer other important questions:
• Rates and affordability - can the City offer lower rates or cost savings to its residents and businesses?
• Property taxes - will the revenue from electric service allow the City to reduce its dependence on millage, thereby easing the tax burden on property owners?
• Efficiency - will municipalization create a more efficient government through economy of scale and enhanced coordination with CGS and the City’s other utilities?
• Customer service - can the City's existing utility customer service framework provide more responsive service for Clearwater businesses and residents? The Tampa Bay Times has reported that Duke had 9x the number of customer complaints, per capita, last year, as Florida Power & Light.
• Public safety - can municipalization improve public safety by allowing the Clearwater Police Department to manage electric service during a police SWAT response, or by allowing the Clearwater Fire Department to disconnect electricity when responding to fires? Will local substations be more secure or less secure with the City deciding appropriate security measures?
• Staffing - will the City be well positioned to care for Duke's linemen and other employees, especially those who work or live in the City, during and after the transition?
• Undergrounding - as the number and severity of hurricanes continue to increase, is the City more likely or less likely than Duke to invest its profits in undergrounding?
• Tree removal - in places where undergrounding is impractical, is the City more likely or less likely than Duke to preserve the City’s tree canopy?
The study will take approximately nine months, culminating in a final public report to the City Council.
APPROPRIATION CODE AND AMOUNT:
A third quarter budget amendment will establish special program M2403, Feasibility Study, recognizing a budget increase of $504,000 of unallocated special program fund reserves to fund this purchase order.
STRATEGIC PRIORITY:
This furthers the strategic plan supporitng the following objectives:
High Performing Government: objectives 1.1 and 1.5
Economic Development: objectives 2.1 and 2.4
Community Well-Being: objectives 3.2 and 3.4
Environmental Stewardship: objectives 4.1, 4.2, and 4.4
