MARCO ISLAND — I’ve had a number of questions from residents about the proposal I made at the last City Council meeting regarding an electric rate subsidization study, some of which I’d like to address in this article.
WHAT DO YOU MEAN BY SUBSIDIZATION?
Subsidization in this case means Marco Island paying more than it should in electric rates to reduce the cost to others.
WHY EXAMINE THIS ISSUE?
The average resident’s cost for electricity exceeds their expenditure for city property taxes, water and sewer combined.
Electric rates have risen by over 40 percent in the past 4 years. The city is projecting a 50 percent increase in electric rates in the next few years, which has not been refuted by LCEC.
Since electricity represents some 25 percent of our cost to produce and treat water, these rate increases result in increased water rates, as well.
Revenue from high revenue density areas like Marco Island, is used to help fund major development projects in less dense areas of LCEC’s service territory off the Island — like Ave Maria and others.
The State Public Service Commission (PSC) does not monitor or regulate any subsidization within a rate class (such as residential rates). It is solely up to LCEC to set rates and to determine who should subsidize whom.
Other municipalities in Florida, armed with factual evidence, have been able to obtain major concessions from their local utilities.
WHY DO THIS STUDY?
We can conduct a subsidization study at a fraction of the cost of a “municipalization” (takeover) study previously proposed.
Even if LCEC decides not to cooperate in providing the necessary data, we have identified an independent consultant who can provide a good analysis at a low cost utilizing industry and other study data for those areas where additional information is needed.
Why shouldn’t we get the facts on a matter of such economic importance to our community, especially in these tough times? We have expended far more on studies, such as the forensic audit, (which offered little or no promise of economic return) when the result of this study could eventually yield a return of millions of dollars in potential savings benefit.
This study could provide the leverage needed to help reduce future rate increases for Marco Island. In addition, as has been shown before, when multiple municipalities join forces, they can achieve remarkable results in reducing costs.
It is unfortunate that the original focus of the City’s Ad Hoc Committee was concentrating on municipalization, which created concerns over take-over of LCEC, versus focusing on the core issue of subsidization.
Our residents have always been concerned about our position as a “donor city” in matters from school funding to police enforcement — most of which we have little control over. This study would provide an opportunity to “get the facts” on an issue of much greater financial importance, with the potential for significant leverage and reduced electric rates. To not do the study would be irresponsible.