Florida Senate - 2016 CS for SB 840 By the Committee on Communications, Energy, and Public Utilities; and Senator Simpson 579-04015-16 2016840c1 1 A bill to be entitled 2 An act relating to municipal power regulation; 3 amending s. 163.01, F.S.; requiring certain entities 4 created under the Interlocal Cooperation Act of 1969 5 to submit independently prepared financial statements 6 for certain electric power projects to specified 7 public entities; providing statement requirements; 8 providing eligibility requirements for membership on 9 the governing body of certain entities created under 10 the Interlocal Cooperation Act of 1969; providing an 11 effective date. 12 13 WHEREAS, The Florida Municipal Power Agency is a joint-use 14 action agency created pursuant to a series of interlocal 15 agreements with the state’s municipalities to finance, acquire, 16 contract, manage, and operate its own electric power projects or 17 jointly accomplish the same purposes with other public or 18 private utilities, and 19 WHEREAS, the Florida Municipal Power Agency is governed by 20 a board of directors, consisting of one board member from each 21 member municipality, which decides all issues concerning each 22 project except for the “All-Requirements” power supply project, 23 and 24 WHEREAS, the All-Requirements power supply project is 25 governed by an executive committee, with each All-Requirements 26 project member municipality that purchases power from the 27 project appointing one executive committee member, and 28 WHEREAS, the Auditor General conducted an operational audit 29 of the Florida Municipal Power Agency and released Report No. 30 2015-165 to the Joint Legislative Auditing Committee on March 31 30, 2015, which included findings and recommendations, and 32 WHEREAS, the Auditor General found many of the Florida 33 Municipal Power Agency’s hedging activities to be inconsistent 34 with other joint-use action agencies, leading to net losses of 35 $247.6 million over the past 12 fiscal years, and 36 WHEREAS, the Auditor General concluded that several of the 37 Florida Municipal Power Agency’s personnel and payroll 38 administration activities may negatively affect future rates, 39 including the Chief Executive Officer’s employment contract that 40 provides severance pay and lifetime benefits even if employment 41 is terminated for cause, and 42 WHEREAS, the Florida Municipal Power Agency did not 43 consistently follow its own procurement and competitive 44 selection policies, one of which may increase the cost of future 45 bond issues, and 46 WHEREAS, the Florida Municipal Power Agency’s All 47 Requirements project agreement to curtail peak-shaving 48 activities is primarily voluntary, relies on self-reporting, and 49 contains no penalties for noncompliance, and 50 WHEREAS, certain All-Requirements project contract 51 provisions relating to the withdrawal of members are ambiguous, 52 use a fixed discount rate rather than one based on current 53 capital costs, and do not provide for independent verification 54 by a withdrawing member, and 55 WHEREAS, even though the Florida Municipal Power Agency is 56 a governmental entity, many of the laws that apply to local 57 governments do not apply to the agency, and 58 WHEREAS, the Florida Municipal Power Agency is not subject 59 to any rate-setting authority, including by the Public Service 60 Commission, and 61 WHEREAS, there exists a need to promote transparency and 62 consistency and to increase public understanding and confidence 63 in the operation of the Florida Municipal Power Agency by the 64 member municipalities and the public, including those electric 65 ratepayers who are not residents of the municipality supplying 66 electric power but who are subject to a municipality that is 67 receiving power from the agency, NOW, THEREFORE, 68 69 Be It Enacted by the Legislature of the State of Florida: 70 71 Section 1. Subsection (19) is added to section 163.01, 72 Florida Statutes, to read: 73 163.01 Florida Interlocal Cooperation Act of 1969.— 74 (19)(a) Any entity created pursuant to this section that 75 supplies electricity through an interlocal agreement to its 76 member municipalities shall annually submit to the Public 77 Service Commission and each member municipality that 78 participates in the electric power project an independently 79 prepared financial statement for each individual generation 80 asset. The financial statement must include: 81 1. A balance sheet that reflects assets and liabilities 82 associated with each generation asset, including the plant in 83 service, accumulated additions and removals, net plant, 84 depreciation, operations and maintenance expenses, allocations, 85 and any other material asset and liability categories. 86 2. An income statement that reflects each generation 87 asset’s operational and financial activities for the reporting 88 period, including revenues, expenses, gains, and losses. Any 89 gains or losses from hedging activities associated with the 90 generation asset shall be separately itemized. 91 3. A statement of cash flows that identifies changes in the 92 generation asset’s cash flows during the reporting period. 93 4. The current fair market value for each generation asset. 94 The current fair market value shall be determined assuming the 95 price that a willing buyer would pay a willing seller for the 96 generation asset, with neither party being under any compulsion 97 to buy or sell and both having reasonable knowledge of relevant 98 facts, and assuming all risk of ownership, loss, and 99 decommissioning, as applicable. The current fair market value 100 statement shall include the overall fair market value of the 101 generation asset as a whole and each member municipality’s 102 equity position net of the entity’s debt, based on the current 103 fair market generation asset value. The current fair market 104 value statement shall include, after considering the market 105 value of the generation assets, the net return of equity or the 106 cost to exit the entity for each member municipality. 107 (b) To serve as a member of the governing body of an entity 108 created pursuant to this section for the purpose of supplying 109 electricity to its member municipalities, each member of the 110 governing body must be an elected official from one of the 111 entity’s member municipalities. Current members of a governing 112 body of such an entity who are not elected officials may 113 continue to serve until expiration of their terms but no later 114 than July 1, 2018. 115 Section 2. This act shall take effect July 1, 2016. 116