Pensacola inches closer to creating electric utility

A workshop drew a crowd of nearly 100 people who were angry over FPL’s rate increases.
FPL energy grid equipment in Fort Lauderdale.
FPL energy grid equipment in Fort Lauderdale.
Published Jan. 29, 2022

PENSACOLA, Fla. — Pensacola may be close to taking its first real step toward creating a municipal electric utility as anger over Florida Power & Light’s rate increase boiled over at the City Council’s workshop Wednesday.

City Council members appeared open to the idea of commissioning a feasibility study into the idea during the nearly four-hour workshop to discuss the idea.

The workshop drew large crowds of nearly 100 people who were angry over FPL’s rate increases that went into effect this month.

FPL executives faced a hostile crowd at the workshop as they made their case to the city to sign a new 30-year franchise agreement with the investor-owned utility company.

FPL Vice President of External Affairs and Economic Development Pam Rauch gave her presentation while jeers rang out from the angry crowd and had to pause her remarks when she said FPL bills will become increasingly affordable under the company’s four-year plan.

Shouts of “No!” and “You’re charging us double for using less electricity!” were shouted along with other expletives.

Council Vice President Delarian Wiggins restored order, saying law enforcement would remove anyone from the room who made any further outbursts.

FPL introduced higher rates for its former Gulf Power customers this month in a rate plan that was approved by the Florida Public Service Commission last year. FPL’s rates will decrease over the next four years to be lower than Gulf Power’s 2020 rates.

Combined with higher fuel costs that customers are charged, January’s power bills have caused sticker shock among many Northwest Florida residents.

A Facebook Group called “FPL (former Gulf Power) Price Gouging — Northwest Florida” was created last week and has grown to more than 2,700 members. The group is filled with hundreds of posts of people sharing their high power bills.

Many people who spoke before the council said they can’t wait four years as they’re facing having their power cut off this month because of the rate increase.

One Pensacola resident, Candice Lafferty, told the council she faced having her children taken away by the state because her power was going to be cut off.

“We have to figure out if we’re going to eat or pay the power bill,” Lafferty said.

FPL sent customer service representatives to the meeting to help anyone who had issues with their power, including helping them sign up for programs to help people pay their bills.

A majority of those who spoke supported the city moving forward with the study.

“If the offers the city has received from Florida Power & Light were as good as the company says, they would be encouraging the city to do a feasibility study,” Pensacola resident Betty Wilson said. “What are they afraid of that a study might disclose?”

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Despite the anger directed at the company, Rauch argued the city would not gain any leverage if it conducted a feasibility study.

“A feasibility study is not due diligence,” Rauch said. “It is not a negotiating tool. What you’re really considering tonight is whether you’d like to start pursuing municipalization of your electric utility here in Pensacola.”

Rauch said FPL was interested in continuing negotiations and reaching a deal with the city on the franchise agreement.

Rauch stressed FPL’s commitment to creating clean energy and again pointed out that bills in Northwest Florida will go down each year and be lower than Gulf Power’s rates at the end of four years.

A minority of speakers, mainly from Pensacola economic development organizations, said the city should focus on renewing its agreement with FPL.

“In the past three years, Florida Power & Light spent over $60 million in Pensacola and Escambia County on infrastructure,” said former state Rep. Dave Murzin, with First Place Partners. “Let’s talk a little bit about hurricanes. Hurricane Sally is another example of a massive resource that Florida Power & Light can muster, 6,000 resources from 24 different states, 1,800 people in 12 separate staging areas just to answer Hurricane Sally.”

Pensacola’s franchise agreement with Gulf Power expired in 2009, and over the last few years, the city has tried to negotiate a new agreement.

Rauch told the council that Gulf Power, and now FPL, has continued to collect and remit the city its franchise fees under the terms of the old agreement.

According to a memo from former City Administrator Keith Wilkins, the city sought 16 changes to the franchise agreement, including an increase in the franchise fee with proceeds being spent on undergrounding above-ground power lines and five-year reviews of the agreement.

FPL agreed to two of the city’s 16 requests. The requests involved FPL sending payments to the city in 30-day increments, rather than 90 days, and allowing the city to audit the last five years of payments, according to Wilkins’ memo.

Wilkins noted FPL was the cheapest of all investor-owned utilities, but the cost for Florida’s 33 municipal-owned utilities was cheaper for ratepayers.

Attorney Tom Cloud with the GrayRobinson law firm was hired by the city to give the council a report on conducting a feasibility study.

Cloud’s remarks took on the feeling of a college lecture as he went through the history of utility franchise agreements.

Cloud pointed out that in the modern era, about 10 cities have conducted a feasibility study for taking over the electric service and only one — Winter Park — has decided to pull the trigger. Cloud said he was familiar with the Winter Park case as he was the city’s lawyer on the issue at the time.

Cloud noted the city had received a letter from the Office of Public Counsel (OPC) sent on the letterhead of the Florida Senate urging the city not to pursue a feasibility study into a municipal-owned electric utility.

“OPC has never written a letter dealing with this issue before,” Cloud said. “Actually, their purpose in life is to represent you, the customers, in rate cases (before the Public Service Commission). The letter came on the letterhead of the (Florida) Senate, maybe that had something to do with it. I don’t know. I wasn’t there.”

Cloud said the letter argued that large utilities have economies of scale that can’t be matched by smaller municipal-run utilities and that any study wouldn’t take this into account. He said he also felt the letter implied that, unlike Winter Park, Pensacola was too poor to afford its own utility.

“The incumbent will always be cheaper, that’s the argument in that letter — it’s sort of breathtaking — because of economies of scale,” Cloud said. “Maybe, but it didn’t quite work out that way in Winter Park, though. The question is, can you really know any of this without doing a study? The answer is no, you can’t.”

Cloud recommended the city pursue both a feasibility study and continued negotiations with FPL.

Councilwoman Jennifer Brahier, who has pushed the idea of a feasibility study, said she would bring back a proposal at a future meeting once council members have had time to study the issue.

Wiggins joined Brahier in saying he supported a feasibility study.

Other members asked questions but remained non-committal about their position on the issue.

Councilwoman Sherri Myers was among those who didn’t commit to a position, though she brought forward the example that the city of Destin was able to negotiate a better franchise agreement with Gulf Power after it conducted its own feasibility study.

Brahier said she doesn’t know if she supports the city creating its own utility, but the council will never have enough information to even consider the decision unless it conducts the study.

“We owe it to the citizens of this town to do everything we can to make sure we protect them,” Brahier said.