At a special meeting, the City Council on Monday unanimously agreed to extend the city’s franchise agreement with Gulf Power for another year.
The city entered into a 30-year franchise agreement with Gulf Power in May 1986 and, after several updates, the contract was set to expire this May. The new extension pushes the expiration date to May 19, 2019.
Councilman Jim Foreman did not attend Monday’s meeting.
The extension gives Destin officials more time to try to hammer out a new contract with Gulf Power or pursue other options, such as possibly buying and running the company’s utility system in Destin or having a third party buy and manage the system.
Among other concerns, Destin officials say the electric rates that Gulf Power charges to its residential customers in Destin are the highest among the large electric utilities in Florida, and that other utility companies appear to have more favorable policies on converting overhead electric distribution lines to safer and more reliable/aesthetically pleasing underground service.
There are about 15,600 retail electric customers in Destin.
"We’re doing everything we can in our power to try to get the costs down" for those customers, Councilman Tuffy Dixon said at Monday’s meeting.
In a recent letter to city residents, Mayor Scott Fischer wrote that on average, a Gulf Power customer as of Jan. 1 will pay $494 more per year for electricity than a Florida Power and Light Co. customer, $456 more per year more than a Tampa Electric customer and $186 more per year than a Duke Energy Florida customer.
During negotiations on a possible new contract with Gulf Power, Destin officials have raised the possibility of the company reducing and capping its rates.
"We believe that … the (recent Congress-approved) tax reform will have downward pressure on Gulf’s rates," Wendell Smith, Gulf Power’s vice president of customer service and sales, said at Monday’s meeting.
Smith later added that he believes the company’s rates will go down within the next 12 months.
But Councilman Chatham Morgan indicated that he’s not holding his breath.
"We pay the highest power bills in the state of Florida," he said. "And Gulf Power said those rates might decrease. I’ll believe it when I see it."
In a Jan. 10 letter to Fischer, Gulf Power District General Manager Bernard Johnson wrote that Gulf Power’s rates are established by the Florida Public Service Commission.
"Consequently, we cannot guarantee any forward looking rate structure or rate level," Johnson wrote. "There are simply too many variables in the rate making process with the FPSC and we respect the FPSC’s responsibility and authority to set rates in the best interests of all concerned parties.
"However, we are prepared to assemble a team of Gulf Power energy experts to perform a comprehensive, no-cost audit of every electrical account maintained by the city. This will include written audit reports and recommendations for the city concerning alternative rate options, energy efficiency opportunities and cost containment/savings."
As for capping it rates, Smith told the council on Monday that such a decision is the responsibility of the Public Service Commission.
The city and Gulf Power continue to be at odds on the cost of undergrounding overhead electrical distribution lines along a portion of U.S. Highway 98. And each party takes a different stance on a part of the current franchise agreement that pertains to the city’s option of buying the company’s local utility system.
"You have every right to buy the system and operate it," but Gulf Power doesn’t agree that the city can buy the system and then sell it to another company, Smith said.
Attorney Steve Griffin, representing Gulf Power, also told the council that he completely disagrees with that latter potential scenario.
"We believe it is inconsistent with the purpose of that original purchase option," Griffin said.
He added that the Public Service Commission likely would take issue with the city buying and then selling the utility system to another company because it would involve "one incumbent provider being evicted under the guise of a purchase option."
In response to a question from Councilman Cyron Marler, Griffin replied, "I’m not telling you today that the PSC would side with us" in the disagreement. "I think they would."
The city’s special counsel Robert "Sheff" Wright, however, said, "I believe the city should prevail" when it comes to possibly buying the system and then selling it to another company.
Several local residents told the council that they support it in its pursuit of lower electric utility rates and a better overall franchise agreement.
Destin resident Guy Tadlock said the council continues to get unfairly beat up, via robocalls and postcards sent to residents, by a Washington D.C. lobbying firm called Family Businesses for Affordable Energy. That firm apparently has found that many Destin residents oppose the city possibly buying the Gulf Power utility system in Destin.
"It’s kind of a shame that we can’t have a fair discussion and allow you to do your due diligence," Tadlock told the council members.