Title
Settlement Agreement Among Florida Progress Corporation (on behalf of itself and Florida Power Corporation), Carolina Power & Light (on behalf of itself and its affiliates) and Florida Cities (B)
EXPLANATION
GRU is a member of Florida Municipal Power Agency (FMPA). One of the benefits of membership in FMPA is the sharing of consulting and legal expenses for Federal Energy Regulatory Commission (F.E.R.C.) related activities and for other activities where the members have a common interest. FMPA currently uses the Washington law firm of Spiegel & McDiarmid for F.E.R.C. related work and through this joint action with FMPA, Spiegel & McDiarmid is representing both GRU, certain other municipalities and FMPA (together the Florida Cities) in this proceeding.
This settlement agreement involves issues arising from the pending merger of Carolina Power and Light (CPL) a public utility predominately operating in South and North Carolina, and Florida Progress Corporation (FPC), the parent corporation of Florida Power Corporation, a public utility generally operating in west Florida. On February 2, 2000, CPL and FPC filed a petition with the F.E.R.C. for approval of the proposed merger. The F.E.R.C.'s procedures allow for impacted parties to intervene in such fillings to raise issues and seek redress of any adverse impacts. However, the F.E.R.C. encourages the participants to negotiate to try and reach agreements to settle their differences prior to formally intervening. GRU participating through its membership in FMPA as part of the Florida Cities has been involved in discussions with CPL and FPC over concerns arising from the proposed merger. The attached settlement agreement is the product of these discussions and achieves mitigation of our concerns at a level equivalent or superior to those we might achieve by intervention at the F.E.R.C.
The merger raises concerns generally for three subsets of members of FMPA, the "All Requirements Project Participants" members that provide their own power supply but use FPC's transmission system for delivery, the "Wholesale Purchasers" members who purchaser some or all of their energy under firm contracts with FPC, and "CR3 Co-owners" the Crystal River Three
(CR3) joint owners. GRU falls in the latter category as we are neither a All Requirements Project Participant or a firm wholesale purchaser from FPC. However, as this agreement deals with all three group's issues, language addressing those issues is in the body of the agreement, but is not substantive for GRU. GRU's primary concerns are addressed in sections 2.7 and 2.8 that deal with CR3 related issues.
FPC is the majority owner (approximately 90%) and operator of CR3. GRU and the other CR3 owning municipals in FMPA (Co-owners) own less than 10% of CR3. The Co-owners pay a prorata share of all expenses allocated to CR3 by FPC. These expenses include direct costs such as fuel and maintenance expenses and indirect costs such as administrative and general expenses (A&G) from the corporation. The Co-owners' concerns are that the merged company might inappropriately treat CR3 differently than the other nuclear plants owned by CPL, allocate more A&G expenses to CR3 or allocate some of the merger cost to CR3 and therefore impose additional cost on the Co-owners inappropriately. To protect the Co-owners' interest FPC & CPL have agreed to 1) cap CR3 A&G cost at 1999 levels for a period of 48 months, 2) have assured they will make no adverse distinction against CR-3 or CR-3 co-owners as to certain cost allocations, 3) granted expanded audit rights for the Co-owners beyond those granted in the joint ownership agreements and 4) waived certain defenses available to them under federal law. The agreement also stipulates that the merged company will continue to meet all of its current obligations under the CR3 license. In return for these and other items found within the settlement agreement, FMPA and the signatory municipalities agree not to intervene in the merger proceedings before F.E.R.C. or in any other venue except for limited situations as indicated in the agreement.
Recommendations
Authorize the General Manager or his designee to execute the settlement agreement between Florida Progress Corporation, Carolina Power & Light, and Florida Cities substantially in the form attached subject to approval of the City Attorney as to form and legality. Further authorize the General Manager to intervene and protest in any merger proceeding of the above named as anticipated in the settlement agreement if required.
Fiscal Note
Legal fees expended to date to negotiate and develop the agreement are included in FMPA annual dues.
Drafter
Prepared by: Darrell R. DuBose, AGM/Energy Supply
Submitted by: Michael L. Kurtz, General Manager