As its franchise agreement with energy giant Florida Power & Light comes up for renewal for the first time in a generation, Sarasota leaders are taking the opportunity to aggressively renegotiate the terms that govern how FPL provides power to the city. And Sarasota is not alone.
In their attempts to renew 30-year-old franchise contracts with cities and counties around the state, FPL and other Florida energy giants are increasingly squaring off against municipalities that are demanding shorter-term agreements and more flexibility on issues like renewable energy projects and franchise fees.
“We can do a lot better than what we have presently,” says Sarasota Mayor Kelly Kirschner, referring to the city’s current agreement with FPL, approved by the City Commission in 1980. The contract (which you can read in full or download below) allows FPL a monopoly on providing energy to Sarasota and bars the city from “engag[ing] in the business of distributing and selling electricity.” In exchange, FPL pays 6 percent of the revenue it collects from Sarasota back to the city, a cost it passes along directly to energy consumers through a fee on their electric bills.
The arrangement handicaps Sarasota’s ability to pursue renewable energy projects with third-party vendors, a sticking point for the current City Commission. “The landscape has changed as far as solar energy,” City Commissioner Suzanne Atwell said during a May 17 meeting, at which the commission discussed the franchise renewal with its negotiating team, constituents and FPL representatives. (You can watch the entire meeting here; Atwell’s comments come at the 4:21 mark.)
At the meeting, the commission seemed hesitant to embrace any agreement that would tie down the city’s renewable options for three decades. ”Our world is changing very fast,” City Commissioner Richard Clapp said. “Thirty years is going to be pretty different, particularly in the field of energy.”
FPL countered by arguing that the language in the proposed franchise renewal would not bar Sarasota from pursuing renewable energy agreements, but the utility is insisting on the inclusion of a “right of first refusal,” which would allow FPL to match or better any proposal for a renewable project, and require that the city contract with FPL if the company issues such a proposal.
In a letter outlining the city’s positions, Sarasota Special Legal Counsel Robert Scheffel Wright claims that if retained, the first-refusal language would have an “inevitable chilling effect” on potential suppliers. Why would a solar panel builder, for example, invest in creating a serious proposal for the city if the company is aware that FPL can override the contract at the last moment by offering to do the job itself? (You can read in full or download Wright’s letter and documents outlining the current negotiations below.)
“I think that offering to allow us to [contract with third parties] and insisting on the right of refusal is tantamount to not offering to allow us to do it,” City Commissioner Terry Turner told FPL representative Patrick Bryan. Bryan defended the first-refusal clause by arguing the deal would not be exclusive. “We put language in the franchise agreement that says you have the right to purchase from a third party, subject only to our right to match,” he told Kirschner later in the meeting.
At the close of the hearing, the City Commission voted to send its negotiating team back to FPL to obtain a five-year franchise agreement that contains explicit provisions about dealing with third parties and language that allows both the city and FPL the same legal rights should a dispute arise between the two, among other items. Wright, who is steering the city’s negotiations, redrafted the city’s suggestions and sent them to FPL yesterday; a second public hearing is scheduled to occur during a public meeting soon.
In its fight, Sarasota is building on other cities’ experiences negotiating with Florida’s energy powerhouses, which are increasingly facing populaces unhappy with their cities’ long-term deals. In 2003, citizens of Winter Park voted in a public referendum to exercise a buyout option in the city’s franchise agreement with Progress Energy, paving the way for the creation of a city-owned electric utility. Earlier this month, Biscayne Park voted to approve a 30-year deal despite citizen opposition, and Cocoa Beach is in the middle of a push for a five-year extension of its FPL deal.
That opposition to franchise agreement renewals was not common in the past. Many cities find it difficult to pass up the guaranteed revenue — Sarasota earns around $5 million annually from its FPL deal. If FPL threatens to suspend those payments, city officials are generally cowed into accepting its terms.
“It seems like right now there is this undercurrent of citizien revolt in South Florida,” Mayor Kirschner says, adding that the negotiations can become a tense process because they’re so rare. “Honestly this is really the only leverage we have as a community with FPL, and the reason they want a franchise agreement is it’s really rock solid.”
The 1980 Sarasota-FPL agreement:
Wright’s letter and documents outlining current Sarasota-FPL negotiations:
[Pic via flickr.com/photos/waynenf]