LEGISLATIVE ACTION ITEM
SPONSOR: City Council Member Jennifer Brahier
SUBJECT:
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FEASIBILITY STUDY -- ELECTRIC UTILITY
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RECOMMENDATION:
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That City Council request that an RFP be developed to conduct a feasibility study regarding an electric utility. Further, that the RFP be returned to City Council for approval prior to advertisement and that the approved RFP be advertised within 60 days of City Council’s action. Finally, that City Council allocate $75,000 for the feasibility study.
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HEARING REQUIRED: No Hearing Required
SUMMARY:
The City is currently in the negotiations for a Franchise Agreement with Florida Power & Light, with the request being a 30 year agreement. The agreement in place at this time carries forward on a month-to-month basis. While in this negotiation phase, and in order to be fully informed with the ability to do our due diligence, it would seem that conducting a feasibility study regarding an electric utility would assist in this endeavor.
A feasibility study is an analysis that considers all of a project’s relevant factors to ascertain the likelihood of completing a project successfully. The study will assess the practicality of a proposed plan or project. It considers many factors, including economic, technical, legal, and scheduling to determine whether a project can succeed. The determination of whether a project is feasible or not can depend on the project’s cost and return on investment, which might include revenue from consumers. (Tom Cloud Presentation).
Throughout the United States, feasibility studies are also used as an initial step in determining whether or not to form a new public power utility to determine if the new utility is likely to be economically viable and receive community support. These studies are designed to answer the initial question of what savings will result from forming a public power utility or exercising other local control options. (Tom Cloud Presentation)
Typical components of a feasibility study are:
• Legal requirements to be fulfilled
• Methods of valuing the utility property to be acquired
• Alternative sources of wholesale power
• Projections for capital and operating costs
• The impacts of the purchase OR sale on utility customers, both positive and negative
• Any required additional investment and the ability and willingness of the purchaser to make that investment
• Alternatives to the purchase, and the potential impact on utility customers if the purchase is not made
• The ability of the purchaser to provide and maintain high quality and cost-effective utility service (Tom Cloud Presentation)
In conducting a feasibility study, the city should look for the qualifications to include but not be limited to:
• Specialization in utility regulation in the State of Florida
• In depth knowledge and expertise in energy markets
• Experience with municipalization of an electric utility
• Experience and expertise with accurate and reliable feasibility studies for the possible municipalization of a utility
• Experience and expertise with developing and negotiating franchise agreements
Some of the answers to be sought through a feasibility study will include but not be limited to:
• To provide a high-level analysis of the viability of municipalization of an electric utility
• To determine the financial viability of acquiring the distribution assets from FP&L
• To develop a sustainable financial model that includes all capital, operating and financing costs for the acquisition and operation of an electric utility
• To determine the feasibility of the City purchasing renewable energy for the utility.
• To provide a basic discussion of the rates and rate structure that would be necessary to successfully operate and maintain the utility
• To provide a recommendation as to whether the City should pursue municipalization of an electric utility.
PRIOR ACTION:
January 26, 2022 - City Council received presentations from representatives of FP&L as well as Tom Cloud of GrayRobinson.
FUNDING:
Budget: $75,000 - Unassigned Fund Balance in the General Fund
Actual: $75,000 - Unassigned Fund Balance in the General Fund
FINANCIAL IMPACT:
Reduction in the Unassigned Fund Balance within the General Fund.
STAFF CONTACT:
Don Kraher, Council Executive
ATTACHMENTS:
1) None
PRESENTATION: No