This is the latest update on the continuing issue regarding the negotiations between the City of Cape Coral and LCEC:
PUBLIC SERVICE COMMISSION FILING WILL DELAY FRANCHISE NEGOTATIONS AND INCREASE COSTS TO CITY TAXPAYERS AND LCEC MEMBERS–City Legal Consultant Recommends Suing Over Franchise Terms That Have Yet to be Negotiated The City of Cape Coral recently advised LCEC of its intent to file a request with the Florida Public Service Commission (PSC) challenging LCEC’s electric rate structure.
Unfortunately, the legal theories to be discussed with the PSC relate directly to franchise agreement terms provided by the City to LCEC on March 9, meaning that no substantive negotiation can take place until the PSC rules.
After waiting nearly a year for a franchise proposal from the City, LCEC had hoped to begin good-faith negotiations immediately. However, it would be a waste of both taxpayer and LCEC member resources to negotiate terms that are part of a legal challenge before the PSC. It will mean a costly delay in working out a resolution in the best interests of their constituents.
Electric cooperative rate structures are reviewed by the PSC to ensure they are non-discriminatory. The PSC has reviewed and approved LCEC electric rates – now among the lowest in Florida – many times over the years. LCEC recently reduced rates for the fourth time in two years, reporting rate changes to the PSC each time.
Utilities conduct cost of service studies to establish pricing that is equitable, and to ensure that one customer class does not subsidize another. The studies establish customer pricing that is at levels appropriate to serve residential, commercial, and industrial customers. LCEC performs and submits all documentation required by the PSC.
The City’s legal consultant is recommending a PSC filing based, in part, on the belief that costs and pricing should change within rate classes based on population density across geographic regions. In other words, rates should change based on geography and customers in some areas should pay more than customers in other areas. The cost and effort to conduct additional research by geography would be extensive and would serve no purpose with respect to electric rates. Interestingly, while arguing this geographic-based rate theory, the City maintains a traditional rate structure for its water utility that is not based on population density. Some areas of Cape Coral are denser than others but all City water customers pay the same rate.
Among other recommendations, the City’s legal consultant also advised the City to consider filing a complaint with the PSC regarding rates for a new LED lighting program and Contribution in Aid of Construction (CIAC) policy, over which the PSC does not even have jurisdiction. LCEC’s LED and CIAC rates are in line with other utilities and are applied consistently across LCEC’s service territory.
LCEC recently reviewed the new LED lighting program with City officials explaining the reduced energy charges and the higher fixture prices resulting in a pricing structure and performance equal to the existing lighting program. Specific fixture pricing information was not released due to the proprietary nature of the vendor bidding process. Maintenance cost and life-cycle data is not yet available since LED technology is fairly new in the industry.
The LCEC CIAC policy has been in effect for many years and although not under the jurisdiction of the PSC has been vetted by the Commission. The LCEC policy is very similar to policies required by investor-owned utilities and relates to recovering costs for power lines extended to areas not currently served so that all rate payers do not bear the cost. “We are disappointed that efforts and resources continue to be aimed at litigious activities rather than focusing on the negotiation of a new franchise agreement,” said CEO Dennie Hamilton. “We stand ready to work together with City leaders to negotiate an agreement that is in the best interests of our members in the City, and we hope such negotiation can begin soon.” The City will address the issue at their regular City Council meeting tonight.