Florida Power says no to a five-year contract extension, leaving the city with little time to decide whether to create its own utility.
The clock is now ticking on Dunedin's inquiry into whether it should break away from Florida Power and start its own electric utility.
The power giant has denied Dunedin's request for a five-year contract extension that would have bought the city more time to figure out the complex financial and legal terms of the idea. The contract expires Jan. 1, 2002, and city officials believe they need more than a year and half to make a decision.
While the decision came as no surprise to city officials, it could put the city's effort in peril.
"I read it as "Heck, no,' " said City Manager John Lawrence, who received the notification by letter Wednesday afternoon. "You'd think if they want to work this out, they'd give us a little more breathing room. But it doesn't seem they want to."
A study by a Pittsburgh consultant indicated that the city could save $3.5-million by breaking away, but Florida Power officials say Dunedin would lose money and have to raise electric rates 12 percent to 15 percent. If the city proceeds, the matter would very likely end up in court, where it could drag on for years.
"It makes it very difficult, but it shows the amount of power and influence Florida Power has," said Mayor Tom Anderson.
Belleair and Dunedin are sharing research costs into whether they should form their own electric utilities. Belleair's contract expires Dec. 1, 2001, but Florida Power has not received a request for a contract extension from the city.
Florida Power does not sign short-term agreements, said Regional Manager Nancy Loehr. Instead, the company has offered Dunedin a 30-year franchise agreement that gives the city some flexibility should electric deregulation come to Florida, she said. Seven other communities have signed 30-year contracts with Florida Power in the last year.
"We're offering them a franchise that's negotiable," Loehr said. "I'm not sure we're married to 30 years. . . . We're willing and eager to start talking to them about how to move forward."
But Florida Power did recently sign a 5-year contract with the city of Maitland. Loehr said Florida Power primarily agreed to it because the city was experiencing legitimate service problems with the company. And, she said, Maitland agreed to abandon its inquiry into starting a new utility and come to the table to negotiate a longer contract.
"Maitland was completely different circumstances," Loehr said. "We admitted we had reliability issues. . . . We wanted a chance to improve our reliability."
That is not the case in Dunedin, Florida Power officials said.
"There's no reliability issue in Dunedin," said Ed Armstrong, a Clearwater lawyer representing the company.
Should the contract expire before Florida Power and the city reach an agreement, the company will continue to provide electricity to the city's 20,000 customers, Loehr said. But it will not continue to collect from customers a franchise fee that is turned over to the city. The fee generates $1.5-million a year for the city.
Armstrong said that without a contract, the company would not have a legal basis to continue collecting the fee.
Dunedin Public Works Director Robert Brotherton said the city will have to speed up its inquiry.
"If they're not going to cooperate, that means we've got to do things more quickly," Brotherton said. "We can't get to the end and be faced with the potential to lose $1.5-million in revenue."