Controversies, challenges continue in Marco’s study of electric utility takeover

Consultant estimates $100,000 to determine feasibility

— City Council will determine Monday if support of the study to take over the island’s electric company, Lee County Electric Cooperative, should continue as they vote whether to spend about $100,000 on the consultant firm, RW Beck.

The committee studying the feasibility of taking over LCEC began discussions Oct. 29 with constultants from RW Beck, which is the firm the committee ranked as their top choice.

The committee and consultants noted several challenges they will face in reaching their primary goal of lowering electric rates including committee members’ expertise or lack of it, possible conflicts of interest between LCEC and the consultant and whether the city will ultimately have the power to buy the utility without owners’ consent.

The committee chose RW Beck, a Seatle-based firm with 22 offices in the U.S. including Tampa and Orlando, over Virchow, Krause & Co., a Milwaukee-based firm with eight offices in the upper Midwest.

The decision came after committee members blindly ranked the two firms based on proposals and interviews in early October. City Council will vote whether to accept their recommendation Monday.

The committee only had two firms to choose from when six of the initial eight consultants who inquired about the project backed out due to conflicts of interest with LCEC, according to Public Works Director Rony Joel.

Committee member Jose Granda said he didn’t support the choice of RW Beck.

“I felt you (RW Beck consultants) were too tied into LCEC,” Granda said at Wednesday’s meeting.

Resident Bill McMullan, who was initially on the committee and withdrew citing his belief that it was a “sham,” said in an interview that he believes more consultants should have been considered.

“We’re not reinventing the wheel here. Other cities have done this. I don’t think a pilot project is necessary either. We can get estimates,” McMullan said.

McMullan also criticized how the city approached the topic of taking over an electric company and said he was suspicious about the involvement of former City Councilor John Arceri.

“I don’t have allegations against Arceri. I have concerns and I have a right to have concerns,” McMullan said.

McMullan’s concerns stem from a public records request yielding hundreds of e-mails between Arceri, Joel and several City Councilors.

In at least one e-mail, McMullan said he read a request for two city councilors to meet with Arceri.

“Can you prove they actually met and a councilor didn’t say ‘no’ to the request? No you can’t,” McMullan said clarifying why he finds it suspicious but is not making a formal allegation.

During the Oct. 20 City Council meeting Joel and City Manager Steve Thompson said Arceri’s involvement came upon their request for him to get involved in discussions with LCEC because Arceri had an extensive background in electric while no other city officials have such expertise.

“I’ve heard council and the public say I should use the community to complement staff needs. I can’t judge the political implications of that and I don’t need to ... I asked Mr. Arceri for help because I don’t have the expertise in electrical municipalization,” Joel said at the Oct. 20 council meeting.

Councilman Rob Popoff said that after going through “every single e-mail,” of which there were about 600, he noticed that almost every one began with: “Per your request.”

Councilman Chuck Kiester said he still had concerns including e-mails that “originated long before the council showed any interest at all in LCEC.”

Arceri said that his involvement in any electric related issues taken on by city staff began when he was on City Council and evolved into discussions of undergrounding and municipalization.

Arceri said that when serving as the city’s “utility expert,” he got together with LCEC on undergrounding and LCEC’s estimates began at $7 million in 2004 and became $30 million in February 2008.

“That spilled over into the municipalization ideas,” Arceri said.

The allegations of fraud and impropriety are “the purest form of political revenge,” Arceri said.

“Kiester blames me for the sewers. He blames me for the conviction of the violation of the sunshine law. His four candidates lost the election,” Arceri said in a follow-up interview with the Eagle.

“I still can’t believe I wrote 600 e-mails,” he added with a smile

Popoff said he shared Kiester’s concerns about the volume of e-mails, but “the name on the e-mails makes no difference.”

Kiester said he agreed.

McMullan said that he too has nothing personal against Arceri.

“I like (Arceri). I have no animosity toward Arceri or anybody. I just don’t like the thought that people have a back door to city hall,” McMullan said.

Arceri was once signed up for the committee to study the electric company’s takeover but backed out saying there were enough people on the committee with business and utility backgrounds.

Arceri’s 44 years of experience with New York electric utilities likely lent some economic value to the city. He said he has worked on the side of defending electric utilities from being taken over by governments and valued his volunteer consultant services for the city as high as $50,000 in the last year.

He said he has no interest in getting out of retirement and would decline any offer for a paid position with the city if it should municipalize the electric company.

The issue of whether the current committee has the credentials to assist in the LCEC takeover popped up at Wednesday’s committee meeting.

“No disrespect to this committee, but I don’t think the bulk of this committee is qualified,” said RW Beck consultant Jeff Larson.

Committee member Steve Stefanides agreed.

“No court is going to accept my notes ... I’ll go out there and count poles for you, but it has to be all experts out there determining the value (of LCEC’s on-island utility),” Stefanides said.

Discussions between RW Beck consultants and the committee indicated that the committee may be best suited to research other cities’ electric municipalization efforts while RW Beck conducted the other required research and documentation.

RW Beck estimated that with the assistance of the committee they could complete the first phase of the study for less than $100,000.

The first phase of the electric municipalization study, if approved by council, will likely include determining savings to the city in rates and undergrounding, establishing open communications with LCEC and determining if city takeover is technically feasible.

The committee and consultants also recognized some challenges that they will face in the process.

“If the cooperative is cooperative” the city can save money on researching the value of LCEC, said Ted Szymankiewicz, the feasibility consultant with RW Beck.

Joel said he believes LCEC’s cooperation is possible.

“They’ve said no to the sale, but that’s a long ways away from saying no to the study,” Joel said.

LCEC will consider answering questions from the committee on a “case by case basis,” spokeswoman Karen Ryan wrote to the Eagle in an e-mail.

The longer term possibility of acquiring LCEC through eminent domain, which is the power of the government to take over private property without the owners’ consent after offering to buy it, may also be a challenge.

Szymankiewicz said LCEC’s substation, located at SR-951 and U.S. 41 is about five miles off the island, so unless LCEC sells the substation, the city won’t have the power of eminent domain because it is outside of the City of Marco Island’s jurisdiction.

Joel said an intermediate agreement with LCEC may include accepting the current electricity rates if LCEC would agree to share the cost of undergrounding.

City Council will determine if RW Beck should be hired as well as determine the scope and budget of the study Monday.

© 2008 All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Comments » 14

happy6 writes:

what a much did we spend on this fiasco so far?

Fossil writes:

the city’s “utility expert,”.... When was he appointed Marco Island's "utility expert"? Under what authority? Could it be that the real reason this fellow didn't want to join the Committee was LCEC might use their considerable interest in this matter to validate his expertise? This inititive is simply another effort to seek revenue from our taxpayers. People, the city wants your money, the shadow government has some plans that need cash now.

MKL writes:

I can not understand why the Marco City Council would want to own an electric company. It seems to me that they have their hands full with water management, sewers, regulations, safety, city beautification and all of the other issues that come before the council. I believe that LCEC has been a good utility manager. I would suggest that the council needs to drop the issue of purchasing an electric utility.

sailingalong writes:

It is insane that the city would spend $100,000 on a study to do something no one wants. We waisted $500,000 on Minozzi's bridge sturdy, now we are going to waste $100,000 on Arceri's electrical study. Pigs will fly before the citizens will support adding the electric utility to the package of mismanaged utilities we already have.

happy6 writes:

and don't forget the cameras reinke bought that don't work, the "too many lamp poles" we have and NOW the new "colors" for the police cars...

Geezer writes:

This is a joke! I hope council votes against this consultant. Why wsste the money!

waterday writes:

Our utility is ran efficiently by LCEC. In our 25 years on the island, we have only praise for LCEC. through every hurricane that has came our way, LCEC has quickly returned power to Marco. the longest outage- 2 days! a quick to respond, professional and efficient company. It is a coop- and every resident that is signed up with LCEC is an owner- we get a small refund check back each year from this utility. WE DO NOT WANT MARCO CITY - WITH A SPEND SPEND AGENDA! THE CITY already was given our water company (we voted yes for Marco to own the water) and look at the mess and the major price increases! we pay more in water than most communities in the entire USA. Please citizens of Marco- fight this takeover (study) that the city is trying to obtain. We do not need to be hoodwinked again, and the city needs to get out of our pockets- or plant money trees in our backyards.

deltarome writes:

The intent of the committee and study is to find out what options we have to reduce the cost of electricity to the city and residents. The city spends over 3 million dollars a year for electric purchases. The island residents and businesses purchase more than 10X that each year.LCEC is a monopoly and like any monopoly, spends money how they feel and not always in the interest of their customers/owners. While LCEC has in the past returned excess profits to their customers/owners, they haven't done that in the past two years. They reportedly made a profit of almost two million dollars last year from sales to Marco Island.Marco is a densely populated area with heavy residential and commercial users of power and have a low incidences of non payments. That is different than the rest of LCEC. LCEC is reportedly expanding their electrical grid to serve the needs of new developments, including Ave Maria and possibly using the profits from Marco.
Another area of concern is that to reduce the vulnerability of Marco citizens and businesses to storm damage, the switching of overhead lines to underground is needed. The city of Marco Island has been collecting a 5% franchise fee on our electric bills to fund the undergrounding. LCEC is the only one who can do this by law and the cost of which must be borne by Marco Residents. LCEC has reportedly raised the price to do this by over 3X over the past few years with no explanation. Then by law, not only do Marco residents need to pay for 100% the undergrounding, we then need to turn over the ownership to LCEC!
Another concern is that LCEC purchases power with long term contracts from other utilities and passes the cost along to its customers. We have no choice in whom they purchase the power with nor at what cost. We have to pay for that no matter what. We also have to pay to use electric lines to get the power to LCEC lines from whom ever generates it. Presently, LCEC purchases power from Seminole Electric, located near Orlando. There are other potentially lower cost producers closer to Marco such as Progress Energy and FP&L.
While the study may cost up to $100,000 and it seems like a large cost in a time of tight budgets, it will be paid for by money already collected by the City from the franchise tax and will not be paid for by property taxes. It is also less than 3% of what the city gov't now spends for its own electic purchases. It is a small amount to see what alternatives the city has to reduce the cost of undergrounding and electrical purchases in the future. That is the goal and not to just purchase the assets of LCEC so the island can run its own electric system.
No one is saying that LCEC isn't providing reliable electric service to the island, it is but why should we be the cash cow to pay the bills of others? Until the study is completed and the true costs known, we won't be able to negotiate with LCEC from a position of strength.

waterday writes:

LCEC is very reliable and cost effective. LCEC stands for LEE COUNTY ELECTRIC COOPERATIVE.. This is the same utility company that gives service to LEE COUNTY...(Lee county is a big area, not like Ava Maria) This takeover (study) is for ownership by Marco City, for profit. Our city is monopolizing our utilities, why? because the water company is a huge profit for the city, at the citizens expense. the electric company (that is now efficient) would be another huge city bill for citizens and we would all see enormous bill increases so that our city has more money for its spend spend agenda. The study once completed (City will have impressive charts and numbers; all informative for the takeover and recommendation of City owned utility, then the City as stated above will have the STRENGTH to negotiate a takeover) Like the stock market fiasco - this information (of charts and numbers) will be in the favor of our Marco City, and Marco City our cash cow will be holding the stock. We will all be paying dearly for Marco to own the Electric Company. This is a waste of $100.000 and it is taken from the franchise fee. (that the city conveniently charged us all - for underground electric that went to something else.. was it lights on sidewalks? or hidden in another agenda) Wake up Marco, we are being hoodwinked.. the same way - when Marco wanted to own the water company, we all agreed and there was definitely a hidden agenda when the Water Company became part of City Control. We all pay more dearly for water, and the water company is for city profit, and we now are all assessed for sewers whether we wanted them or not (no say by citizens) and we all pay more fees on our water bills. thanks to our city owning the water. do not let the same mistake happen with our electric. LCEC has been on Marco for over 25 years, this is a company that is reputable, honest and reliable and we should all fight this study and takeover by Marco city.

smiley writes:

Just think back over the past few years....This city has bungled virtually every major project it has undertaken. Don't add a power company to the list.

deltarome writes:

I don't disagree with the outcome of some of the cities past adventures and the intent of the committee is not necessarily to take over the electric distribution on the island. Even Rony Joel, City Public Works Director, thinks there will not be much savings to the rate payer if the city took over.
The intent is to reduce electric costs to the City govt and to its citizens.
LCEC is a monopoly and monopolies in general tend to get fat with waste and tend to look after the needs of management, not their rate payers. Where are "our" LCEC member dividend shares from the last two years?
Why has the cost of undergrounding more than tripled in the past 3 years? LCEC yas yet to explain the increase.
No one is saying that LCEC isn't "reputable, honest and reliable" what ever those words mean these days. The concerns are is LCEC running at minimum cost? What excessive overheads are they putting into the recent prices they have given City for undergrounding? Competitive prices for similar work elsewhere are half of what LCEC has quoted. There must be an "honest and reputable?reason for that!

waterday writes:

I believe as many citizens that the intent of this study is to takeover the electric. This is the "hidden agenda" of our city. Why do a study, if there will not get any savings to the rate payer.. AS YOU JUST STATED!? Our city government at the moment has its hands full with the mess that has been created in just a few short years. Marco City is a monopoly and just like you stated this new city of ours is getting fat with waste, and also by looking after the needs of management, not the citizens of Marco. Sounds to me like you just described our City of Marco not LCEC. I do not know why we did not receive our small dividend shares .. can someone call LCEC and get an explanation on this? perhaps our rates were not increased,my bills have been about the same at my residence and commercial buildings on Marco for the last two years, maybe this is where my dividend shares went? I can not say the same for my CITY OWNED WATER BILL- it has TRIPLED IN TWO YEARS. LCEC is a good reliable company that has treated the residents fairly and honestly. I can not say the same for my city owned Water. There must be an honest and reputable reason for that? Oh wait .. we will have more audits and more study.. more dollars spent.. and fabricated numbers and impressive charts to back up all the dishonest politics. give the citizens a break and stop this nonsense and manage the City correctly and get out of our utilities! Please find another "hidden" agenda to take our money. LCEC is not for sale, and needs to be left out of city spending.

marcoredeagle writes:

Did you see the article on the next City of Marco agenda?

See ...

Included is ....
"A resolution to finance $11 million in bonds from Fifth Third Bank for the upgrading of the existing wastewater treatment plant."

The only thing the City of Marco wants is more power. Spending = Money = Power. They believe the solution to every problem is to spend more money.

I only WISH I could do PERSONALLY what the City of Marco currently is doing.

maharg writes:

I would like the management of LCEC to takeover Marco Island government.

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