The Playbook to Privatize G.R.U. and Raise Rates | Opportunity For All Floridians

The Playbook to Privatize G.R.U. and Raise Rates

The Coordinated Campaign to Force the City of Gainesville to Sell its Publicly Owned Utility

In the months leading up to Florida Power & Light’s 2019 takeover attempt of JEA, the city of Jacksonville’s publicly owned electric utility, a series of seemingly disconnected events took place. 

An auditing committee led by FPL-friendly lawmakers was asked to scrutinize JEA’s finances and its involvement in an ill-fated power plant. Legislation was filed in the Florida House of Representatives that would have made municipal utilities far less valuable to their cities. And supporters of privatization began to warn that JEA’s finances were so poor that it was in “a death spiral.” 

Four years later, history is repeating itself in Tallahassee. But there is a new target: GRU, the city of Gainesville’s publicly owned electric utility. 

Over the past six weeks, an auditing committee led by FPL-friendly lawmakers have scrutinized GRU’s finances and its involvement in an ill-fated power plant. Legislation has been filed in the state House that would make municipal utilities far less valuable to their cities. And supporters of privatization are warning that GRU is on the brink of a death spiral.

“We have a GRU that is on the verge of failing – and a city that will tumble after that,” state Rep. Mike Caruso, a Republican whose district includes the Juno Beach headquarters of FPL parent company NextEra Energy Inc., claimed in a recent public meeting.

“We have a GRU that is on the verge of failing – and a city that will tumble after that,” state Rep. Mike Caruso, a Republican whose district includes the Juno Beach headquarters of FPL parent company NextEra Energy Inc., claimed in a recent public meeting.  

But this time, supporters have added a new page to the privatization playbook.

In 2019, FPL’s attempted acquisition of JEA failed in large part because privatization became so controversial and unpopular that locally elected city council members turned against it.  So, this time, utility industry allies in the Florida Legislature are working, behind closed doors, on legislation that would strip decisions about the future of GRU away from locally elected city commissioners in Gainesville and give that power entirely to political appointees of Gov. Ron DeSantis – a Republican who has worked very closely with Florida Power & Light throughout his tenure in office

FPL has so far remained publicly silent about the effort to take control of GRU away from local voters. But the city’s former mayor has said FPL recently expressed interest in either buying some of GRU’s assets or the entire utility. And the FPL-friendly legislator secretly writing the new legislation says the DeSantis-appointed GRU board would have the power to auction off assets – and to consider offers for a full sale.

Though the supporters are trying to hide the ball, this GRU legislation is a privatization plot.

FPL wants GRU

Florida’s private power companies are regulated monopolies. That means they cannot outcompete their rivals for customers. They can only grow their business by getting bigger. That makes acquisitions vital. 

And no one has pursued takeovers more aggressively in recent years than Florida’s largest utility – Florida Power & Light, which serves more than 12 million customers in Florida and accounts for more than 80 percent of the revenue at Fortune 500 giant NextEra Energy Inc. (This report refers to both NextEra and FPL as FPL.)

In 2018, FPL purchased the city of Vero Beach’s 35,000-customer municipal utility for $185 million. The next year, it bought the 450,000-customer Gulf Power from Southern Co. for $1.1 billion.

In just the past three years, the company has also made unsuccessful attempts to buy Jacksonville’s JEA and South Carolina’s state-owned Santee Cooper utility. FPL even tried to take over Duke Energy Corp., the parent company of Florida’s No. 2 power company – a merger that would have expanded FPL’s monopoly to nearly all of Florida. 

And while FPL has never publicly discussed buying GRU, there is ample evidence that FPL has been sniffing around the city utility for years. 

In 2017, State Senator Keith Perry sponsored legislation ordering a referendum on whether to give control of GRU to a locally appointed board.

For instance, in 2017, state Sen. Keith Perry – a Republican who represents Gainesville and who, quite literally, owes his seat in the Florida Senate to an FPL-funded dark-money election scheme – sponsored legislation ordering a referendum on whether to give control of GRU to a locally appointed board

After the legislation passed, a private investigator wrote an op-ed in the Gainesville Sun criticizing GRU’s performance and praising FPL’s – the same private investigator who was caught spying on legislators and FPL company critics. That private investigator, it was later revealed, was being paid by political consultants for FPL.

During the subsequent campaign in the summer and fall of 2018, Perry spent hundreds of thousands of dollars on advertisements that did double duty promoting his re-election campaign while also trashing GRU’s management ahead of the referendum. (It didn’t work: Gainesville voters rejected the GRU referendum by a 60 percent margin; Perry, meanwhile, was reelected by less than 2,00 votes.)

More recently, FPL tried and failed in 2020 to sign GRU to a 30-year power purchase agreement. And former Gainesville Mayor Lauren Poe revealed earlier this month that senior FPL executives approached city leaders in 2022 and “expressed interest in buying some of GRU’s assets or the utility entirely.” 

It is also important to note that GRU has become a much more appealing takeover target for FPL over the last couple of years, too. There are three reasons for that. 

First, in early 2022, FPL completed the integration of Gulf Power into its operations. That leaves north-central Florida as the obvious gap in the company’s monopoly territory. The more assets and customers it can add in the region, the more profitably FPL can integrate its traditional operations in south Florida with the former Gulf Power service territory in the Panhandle. 

The Sabal Trail Transmission Pipeline, a 515-mile long natural gas pipeline, runs through north central Florida, including parts of Alachua, Levy, Gilchrist and Marion Counties. | The Gainesville Sun

The Sabal Trail Transmission Pipeline, a 515-mile long natural gas pipeline, runs through north central Florida, including parts of Alachua, Levy, Gilchrist and Marion Counties. | The Gainesville Sun

Second, the company owns a 42.5 percent stake in the Sabal Trail Transmission pipeline – a 515-mile natural-gas line extending from central Alabama to the Orlando region that went into service in 2017. Sabal Trail’s investors need to develop customers for that pipeline. That’s one reason that an FPL-backed consortium known as “Gator Campus Energy LLC” is vying to build a $235 million gas power plant at the University of Florida. The FPL group appears to be the sole remaining bidder for the project.  

(Note that one of Gov. Ron DeSantis’ appointees to the state university system Board of Governors is Eric Silagy, who was, until very recently, the chairman and CEO of FPL. And that the University of Florida board of trustees, which is also comprised of DeSantis appointees, rejected a bid by GRU to build UF’s power plant.)

Third, the list of realistic acquisitions in Florida are somewhat limited right now. JEA is clearly no longer an option – at least not for the foreseeable future, while a federal investigation continues into the previous privatization plot. And controversies surrounding FPL’s involvement in city politics in Tallahassee recently forced Tallahassee Mayor John Dailey to publicly declare that a sale of that city’s utility company is “not even on the table.” 

One additional note to mention: State Rep. Yvonne Hinson (D-Gainesville) said recently that Duke Energy has been trying to buy GRU for years. Duke also recently hired a longtime executive at the Greater Gainesville Chamber of Commerce – which led the failed 2018 campaign for an appointed GRU board – to be one of its lobbyists

But FPL has been far more aggressive than Duke has in recent years in pursuing acquisitions – and in using the Florida Legislature to achieve its goals.   

Step One: Take Control Away from Local Voters

Though it failed to buy JEA, FPL learned a valuable lesson: It is much easier to buy a utility from that is controlled by political appointees than by elected officials – particularly local elected officials. 

This is what makes the proposed GRU legislation so important. 

Though bill sponsor Chuck Clemons has yet to publicly release details of the proposal, he has already confirmed that he wants this governor-appointed board to have broad privatization powers. 

Florida Rep. Chuck Clemons has not publicly released the details of his proposal, but he has already confirmed that he wants the governor-appointed board to have broad privatization powers.

During an Alachua County legislative delegation meeting last month to discuss the concept, Hinson asked Clemons if the governor-appointed GRU board would have the authority to “dispose of utility assets.”

“Yes, ma’am,” Clemons replied. “When you run it, you run it.”

Clemons added later that he also wanted the board to have the power to consider offers to sell itself entirely. “This board would probably have the capacity to entertain [offers],” he said. 

Giving the power to pick this new board to the governor is no accident. 

Based on the experience with JEA, it is a near-certainty that any attempt to privatize GRU will be unpopular with local voters. But DeSantis – a statewide elected Republican whose only concern right now is his standing with Republican primary voters – has little to fear from voters in Gainesville, one of Florida’s most heavily Democratic cities. (There is far more upside to DeSantis in the form of more campaign contributions from FPL – likely laundered through dark-money nonprofits or business-masking lobbying groups like Associated Industries of Florida.)

And while DeSantis won headlines last year for vetoing legislation written by FPL lobbyists that would have weakened incentives for rooftop solar, the truth is that DeSantis has been very good to FPL. He has appointed FPL executives to key positions throughout state government – including the Board of Governors, the Florida Fish and Wildlife Commission, the Florida International University Board of Trustees, and the Florida Athletic Commission.

More significantly, DeSantis signed FPL-led legislation that effectively fired longtime FPL antagonist J.R. Kelly from the Office of Public Counsel. He signed an FPL-backed bill to let utilities profit off hurricane-hardening. And he has appointed FPL-friendly politicians to the Public Service Commission – including former state Rep. Mike La Rosa and Gabriella Passidomo, the daughter of Senate President Kathleen Passidomo. Those appointees then approved a record-setting rate deal for FPL allowing the company to raise rates by nearly $5 billion between 2022 and 2025

Step Two: Forced Austerity and Political Cover

At the same time as the GRU takeover legislation is being written in secret, the Florida House of Representatives is advancing another bill (House Bill 1331) that would set strict limits on how much money municipal utilities could transfer to their cities’ general funds. That would make owning a utility much less attractive for a city. 

It is vital to remember that the effort to give control of GRU to the governor is part of a multi-faceted strategy. 

Lawmakers have made it clear they are targeting Gainesville. During a hearing on the bill, Rep. Mike Giallombardo (R-Cape Coral) – the chair of the House committee in charge of utility regulation – specifically cited Gainesville as a city that is “transferring tons and tons of money over to their general revenue – essentially people on the outside of the city paying for their parks and all their services that they don’t usually use or they don’t get access to.” 

House Bill 1331 is on the fast track through the Florida House: It has been referred to just two committees by House Speaker Paul Renner – a Republican from Jacksonville whom FPL once tried to hire for its JEA bid team

Meanwhile, the Florida Senate is also working on a different bill that could have a similar effect. That legislation (Senate Bill 1380) would bring GRU under the control of the Public Service Commission – a body that has been so utterly co-opted by FPL and the state’s other private power companies that industry watchdogs have deemed it “captured agency.” 

Here’s what could happen: PSC commissioners could force GRU, which is currently carrying a heavy debt load, to immediately reduce its debt-to-equity ratio. That would force one or more of a series of politically unpopular moves, such as raising rates, raising taxes and/or cutting services. Such forced austerity would give political cover to an offer to buy GRU from a company like FPL. 

Lobbyist-disclosure records show FPL is registered to lobby on both House Bill 1331 and Senate Bill 1380. 

It shouldn’t be surprising, then, that members of the Florida Legislature’s Joint Legislative Auditing Committee also aggressively pushed forced austerity on Gainesville leaders when they staged a public tar-and-feathering of the city and its utility during a Feb. 23 meeting. 

At least three senators on the panel – Jason Brodeur (R-Sanford), Tracie Davis (D-Jacksonville) and Corey Simon (R-Tallahassee) – urged Gainesville leaders to consider raising property taxes.

One of the committee’s co-chairs – Rep. Mike Caruso (R-Delray Beach) – told them they needed to take actions that “cause pain.” 

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Step Three: Raise Rates and Make Profit

Like other regulated monopoly utilities, FPL makes its money by building things. On every new power plant, substation, or transmission line that the company builds or renovates, FPL gets to add in a rate of return for itself. It is, essentially, a guaranteed profit margin on every dollar of capital the company invests. 

This is what makes buying a municipal utility like GRU to appealing to FPL – even if GRU really were financially struggling and on the verge of collapse, as FPL’s allies in the Legislature like to claim. 

Once it owns GRU, FPL will get the Public Service Commission to approve lavish and unnecessary new infrastructure investments that will serve to pad FPL’s profits. And GRU customers will pay for it all through their monthly electric bills. 

This is exactly what FPL did after it bought Gulf Power in 2019, when FPL immediately embarked upon “exorbitant” rate base expansion. This tactic is especially lucrative for FPL, which is guaranteed one of the most generous profit margins in the country – a much fatter profit margin than Duke Energy or Tampa Electric

In addition, as noted earlier, FPL is a major investor in the Sabal Trail Transmission pipeline. Acquiring GRU would lock in a customer for the natural gas being piped through that line. 

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