Municipalization

You may have heard about the process of taking over an electric utility and forming a municipal electric utility (MEU), known as municipalization. Because of the financial risks involved, municipalization is rare.

Q) What is municipalization?
A) In this case it means that the City of Cape Coral would provide electric service by forming, owning and operating its own electric utility.

Q) Why is the possibility of a City of Cape Coral municipal electric utility being discussed at this time?
A) The franchise agreement between LCEC and the City expired in 2016, and the City has stated it is exploring all of its potential options. The options include renewal of the franchise agreement, or the purchase of the utility system and formation of a municipal electric utility in Cape Coral. The City’s consultants have estimated the cost to be approximately $425 million.

Q) Didn’t the City of Winter Park purchase the electric system and form a municipal electric utility?
A) The most recent municipalization in Florida occurred in Winter Park, and the issues involved in that municipalization were vastly different from what is seen today in Cape Coral.

  • Winter Park’s electric utility provider at the time had a substantial reliability problem with numerous outages. LCEC has a demonstrated history of strong reliability.
  • Winter Park was served by a for-profit electric utility. LCEC is a not-for-profit member cooperative.
  • Citizens overwhelmingly supported a takeover in a public vote. Feedback LCEC has received shows that Cape Coral citizens do not favor a takeover, and the City Council has suggested that a public vote is not required.
  • Winter Park is much smaller than Cape Coral, and thus the financial investment required was much smaller. The financial risks would be much higher in Cape Coral.

Q) Why would a city want to municipalize its electric utility?
A) In most instances, cities have pursued municipalization as a result of problems with reliability or escalating rates or to gain access to hydro power. These are not issues in Cape Coral. In the last decade, only four cities have elected to municipalize their electric systems, but all were just a fraction of the size of Cape Coral.

Q) If the City of Cape Coral decides to pursue municipalization, how long would it take for the process to be completed?
A) Due to the complexity of the process it is difficult to determine how long it would take. However, it could take years for the City to actually begin providing electric service to its citizens.

Q) If the City were to form a municipal electric utility, would or could they raise rates?
A) We cannot predict what the City would do with rates; however, the financial outlook developed by the City’s consultants projected annual sales revenues that we believe could only be achieved by yearly increases. LCEC is proud of the fact that we haven’t raised rates in seven years and actually decreased rates four times over the last two years.

Q) Can the City of Cape Coral make the decision to municipalize without going to the electors?
A) This is a political and legal question best answered by an elected City official. Typically, municipalization initiatives of this magnitude are presented to the electors in a referendum. However, it’s too early to speculate whether the City Council would choose to do so in this instance. Even without a public referendum, Florida law holds that any sale of a substantial portion of an electric cooperative’s system requires a vote of all cooperative members.

Q) If the City pursues municipalization, would there need to be a filing with the Florida Public Service Commission (PSC) for the change in service territory boundaries?
A) Yes. While the City has the right to municipalize, it would have to ask the PSC to modify its prior orders approving LCEC’s service territory boundaries. It’s also likely that the PSC would expect LCEC and the City to enter into a new territorial agreement delineating their respective service territories and service obligations after the municipalization.

Q) Can another utility, such as FPL, come in and serve Cape Coral?
A) No. Florida law prohibits the transfer of service territory from one utility to another without agreement between both parties and approval of the Florida Public Service Commission.

Q) What do you mean by “a very risky venture”?
A) Electric service in Cape Coral is reliable, costs are among the lowest in Florida, and the customer experience is good. LCEC has a proven track record during storm restoration and supports the community through volunteerism, funding, and economic development. In addition, LCEC has returned more than $231 million to customers over the years while still investing in the electric system, technology, and employee development. It would be risky for the City to assume they could provide and maintain the same or better service while earning enough to pay back the bonds required to form a municipal utility. LCEC financial consultants indicate a difference of just two percent in the City’s consultants’ projections would result in financial losses.

Q) How can LCEC members and the public at large keep up with the municipalization issue?
A) Continue to visit this website for the latest information and facts.