(Nov. 16, 2016) — LCEC is the not-for-profit electric cooperative that has proudly provided residents and business owners throughout Southwest Florida, including Cape Coral, with reliable electricity and quality service at the lowest possible price.
Over the past 18 months, you may have been following the franchise agreement issue between LCEC and the City of Cape Coral. LCEC’S 30-year franchise agreement with Cape Coral expired on October 1, 2016. This open letter provides important information for members.
A franchise agreement is simply a contract between a utility and a local government allowing the utility to locate poles and wires in rights-of-way. In some cases, the local government requires the utility to collect fees from the customers served by those poles and wires and turn all of the fees over to the local government. Such is the case in Cape Coral, which charges a franchise fee of 3 percent of your electric bill. Keep in mind that a franchise agreement is not required for you to receive electric services, and many cities and counties choose not to use them.
LCEC Provides Framework
In March 2015, 19 months before the franchise agreement was scheduled to expire, LCEC provided City staff with a framework for a new franchise agreement to begin the discussions.
While reviewing the proposal, the City also began exploring the possibility of buying the LCEC electric system within Cape Coral and taking over delivery of electricity within City limits. At that time, the City hired a consultant that estimated the cost of purchasing LCEC’s assets in Cape Coral at more than $400 million.
City Responds With Complaint
After nearly 12 months, the City responded to LCEC’s franchise proposal along with notification that they were filing a complaint against LCEC with the Florida Public Service Commission (FPSC). Because both litigation and negotiation take additional resources such as lawyers and consultants, and also take in-house resources away from normal duties, LCEC communicated that we would not negotiate while also addressing the legal complaint. We did not feel this was a wise use of our members’ resources.
We were pleased when the City hired a professional negotiator and put their legal action against LCEC on hold. Although discussions with the negotiator did not move at a rapid pace, there was progress and I personally worked with the negotiator to lay the foundation for meaningful negotiations. Last week, the City abruptly advised LCEC that negotiations were not moving fast enough and the City’s outside legal counsel would be reinstituting the City’s legal action against LCEC before the FPSC.
This was disappointing to hear, and in this open letter to members LCEC wants to express its genuine interest in finding a resolution. Throughout the negotiation process, LCEC made every effort to listen to the City’s concerns, explore improvements and to offer solutions.
- LCEC increased transparency of Board meetings
- Initiated an LED streetlight program
- Updated its policy for extending service to new areas
- In addition, LCEC continues to address electric rates and member equity — two areas that the City mentioned during our franchise discussions.
LCEC has reduced electric rates five times within the last three years. As of July 2016, LCEC rates are among the five lowest in the state.
More than $242 million in Equity Returned
LCEC is proud of our not-for-profit cooperative business model that is designed so all members share in the responsibility of funding the business. This helps to reduce the need to pay back costly loans and keeps electric rates low.
Members also benefit when margins are healthy and equity can be retired. LCEC has returned more than $242 million in equity over the years. We are not in business to make a profit. We are only in business to serve our members by keeping the lights on.
We are saddened that the City has decided to pursue litigation knowing that it will bring negotiations to a halt and add to the rising cost of attorneys and consultants. We are also dismayed that these litigation costs ultimately fall on your shoulders as taxpayers and also as LCEC members.
Expired Franchise Agreement to Terminate
Given the expiration of the franchise agreement and the City’s decision to litigate rather than focusing energy on negotiating a mutually beneficial agreement in the best interest of citizens and members, LCEC has notified the City that any remnants of the expired franchise agreement will terminate on May 15, 2017, including a potential option for the City to purchase LCEC assets within the City.
Nevertheless, even though the franchise agreement has expired, LCEC will continue to provide reliable, low-cost electric service to all its members in the City, and will continue to collect and remit franchise fees to the City at the 3 percent fee level (amounting to approximately $300,000 to $600,000 monthly).
Meanwhile, this open letter to our members is also to say that we remain hopeful that in the near future we can work toward a new franchise agreement that protects the interests of all LCEC members.
What it Means for Members
What does this mean to you as an LCEC customer? Our promise to you remains the same as it has for more than 75 years – we will provide you with reliable electricity and quality service at the lowest reasonably achievable price.
As long as we serve you, the lights will stay on. Employees will continue to work around the clock to make that happen. We will volunteer and raise funds for causes and events that make our communities stronger. We will continue to be your electric cooperative.
LCEC Executive Vice President and Chief Executive Officer
LCEC Letter to Cape Coral City Manager John Szerlag, Nov. 15, 2016
LCEC News Release