Additional presentation by special utility counsel requested
To the editor:
I am a 30-year resident of Cape Coral and a Utility Electrical Engineer with over 29 years of experience in the electrical utility business. I have worked for both FPL and LCEC. Watching the Cape Coral City Council meetings and reading the franchise agreement has left me quite confused as to the goals and aims of City Council and staff. Maybe Special Utility Counsel for the City, Attorney Brian Armstrong, can clear this confusion up for me.
1. The petition and complaint filed by Attorney Armstrong on behalf of the city alleges that LCEC is sitting on a slush fund of $350 million dollars in capital reserves. The complaint alleges that this was accrued from net margins. At LCEC’s current net margins it would take LCEC 40 years to accrue that amount of cash. Equity is not cash sitting in the bank; it is a credit that allocated to a customers’ accounts.
I would like to see the calculations of how the city arrived at the $350 million dollar figure.
2. The complaint argues that since Cape Coral is an urban area, it should have a different rate from the rural areas that LCEC serves.
LCEC serves five counties in the area. Some are rural and some are not, Marco Island, for instance, is urban. FPL serves different areas of the same five counties. Some of their service territory is urban and some areas are rural. FPL has the same rate for the urban customer as the rural customers.
FPL is regulated by the Public Service Commission. One of the PSC’s tenants for regulated utilities is to ensure one class of customers does not subsidize another class of customers. FPL has had numerous rate reviews over the years and they still have one rate for urban and rural customers.
I would like Attorney Armstrong to explain why FPL should have one residential rate and LCEC should have different rates for essentially the same type of service territory?
3. The complaint asserts that the City of Cape Coral paid for the cost of undergrounding the transmission line and did not own it. This is not a true statement. Cape Coral paid the difference between the cost of an overhead line and an underground line. In essence, the citizens of northwest Cape Coral helped pay to beautify the businesses in the CRA district, who received all of the aesthetic benefits.
I would like Attorney Armstrong to explain why the city does not believe in the principle of “let he who benefits, pay?”
5.Section 7(A) of the franchise agreement states that LCEC shall establish sites within the city for demonstration of new technology.
Section 7(A)(i) states that LCEC shall bear the cost of these new technology initiatives.
I would like Attorney Armstrong to explain why the city wants all LCEC members to help pay the research and development cost of private solar panel companies? Or why the city wants all members to pay for underground in their rates to benefit the few.
6. There were a lot of complaints about Contribution in Aid of Construction (CIAC) at the council meeting. Section 8 of the franchise agreement deals with (CIAC).
By way of example, if you were proposing to build a rental apartment complex, but the amount of rent you could charge would not cover the cost, would you build it? I think not. Now, some entity, like the government, mandates that you build the complex and, by the way, you will be able to charge your neighbors a monthly rate to help you make up the deficit in your rents.
That is essentially what clause 8(B)(ii) is saying. The clause states “Standard overhead line extensions along the route selected by the Grantee for permanent 230v single phase service will be provided to residential customers at no charge.”
The residential rate can only support a certain amount of construction. The rest of the cost of construction must be paid for by someone. There are only two choices of who that someone is, the existing customer, or the new customer, who is benefiting from the line extensions.To quote from the Indiana Regulatory Commission Small Utility Accounting Manual “CIAC is to accommodate new customers without burdening existing customers.”
Section 8(A) also states that “the Grantee shall comply with all aspects of Rule 25-6.064, Florida Administrative Codes.”
Rule 25-6.064 gives formulas for calculating CIAC. The above clause 8(B)(ii) is contradictory to the formulas in Rule 25-6.064.
There are exceptions in the Rule where CIAC can be waived. Clause 8(B)(ii) essential waives CIAC for all residential members. If CIAC is waived, it is excluded from the rate base. That means that citizens of Cape Coral will be paying higher rates so that LCEC can maintain the required revenue to operate.
If the City of Cape Coral did have its own city rate structure, the proposed CIAC policy would only burden city residents, not the rest of LCEC’s members.
I would like Attorney Armstrong to explain why my son is paying $17,000 in CIAC for the water expansion in Cape Coral.
It seems to me that Attorney Armstrong is at cross purposes with himself.
I would like him to clarify his purposes in this franchise agreement.
Is it to provide the best service for Cape Coral citizens?
Is it to create confusion to benefit his consulting firm?
Is it to set LCEC up for failure with a franchise agreement that, if agreed to in its entirety, its requirements could not possibly be met?
Or is there some other agenda? If so, what is it? From the above you can see the source of my confusion.
I would like Attorney Armstrong to address these concerns publicly at the Cape Coral City council meeting within 10 days.
The opinions expressed in this letter are entirely my own as a citizen of Cape Coral, developed from my years of experience and are not necessarily the opinions of LCEC or FPL.
R. Burgess
Cape Coral