CLEARWATER — Earlier this year, the city fielded a barrage of complaints from residents about problems it couldn’t control. After years of watching their electric bills spike, residents fumed with anger as Duke Energy cut down dozens of trees on private property and right of ways for what the utility described as power line maintenance.
The issues prompted an internal conversation about the city’s future with the utility, considering Clearwater’s 30-year agreement with Duke Energy is set to expire in December 2025.
During a work session on Monday, the City Council expressed consensus on hiring a consultant to explore the feasibility of dropping Duke Energy and creating a municipally run electric utility to serve residents and businesses instead. The council will vote Thursday on whether to spend $504,000 to hire NewGen Strategies & Solutions for a study that could take nine months to complete.
“We don’t know what the outcome of this is going to be, but what I know for sure is that it is impossible to come up with a recommendation or even intelligently assess our options without doing a feasibility study,” City Attorney David Margolis said.
The last city in Florida to successfully break from an investor-owned electric utility was Winter Park in 2005, and it came with an epic battle. A group backed by Florida Power, one of Duke’s predecessors, spent more than half a million dollars to try to defeat a voter referendum on the matter, but failed.
Nineteen years after the city made the switch, Winter Park’s customer bills are 27.8% lower than Duke Energy’s, according to City Manager Randy Knight. The city-run utility made a $9 million profit last year, which it invests back into the system without having to pay shareholders like investor-owned utilities.
To date, Knight said the city has buried about 80% of its electric wires, with a goal to be entirely underground by 2030. The change has helped the city increase reliability of service, which was the main driver for its switch nearly two decades ago.
On Monday, Margolis warned council members that they could expect a similar battle from Duke Energy. Jeff Baker, who manages government and community relations for the utility, sat in the second row listening to the discussion.
“If I was Duke’s general counsel, I would be talking to them right now to see if there is a way that we could kill this quietly,” Margolis said.
In a statement to the Tampa Bay Times, Duke emphasized its “army of resources” to fix outages after hurricanes, a point the utility could continue to highlight as a reason the city should stick by its side.
The company also raised questions about the city’s legal ability to buy Duke out of its Clearwater territory, possibly foreshadowing the fight ahead if Clearwater seriously pursues forming its own utility.
”Duke Energy Florida has a right to serve in Clearwater through the Florida Public Service Commission … and none of Duke Energy Florida’s service area is for sale,” said spokesperson Ana Gibbs. “We look forward to answering any questions the city has regarding the value of our service and continuing our long-standing relationship with the city of Clearwater.”
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The study will evaluate potential costs and revenues, technical aspects of the grid layout and more. In Winter Park, the city spent $43 million to buy out its investor-owned utility. But less than 20% of that went toward purchasing poles and wires. Much of the rest covered the costs of paying for the utility’s lost business and investment, a price reached through lengthy arbitration, Knight said.
Clearwater is the second major Pinellas County city mulling a break from Duke Energy, after several members of the St. Petersburg City Council floated the idea earlier this year.
St. Petersburg, though, has not formally dedicated city resources to evaluating whether to form a city-run utility, making Clearwater’s next move all the more significant. St. Petersburg’s agreement with Duke expires in 2026.
Duke’s rates are likely about to get higher for Floridians. Earlier this year, the company asked state regulators for permission to hike base rates by about $820 million over the next three years to help cover costs and to ensure its shareholders make a certain rate of return. Duke has said that because other charges would be falling off Florida bills, customers would still ending up paying less in January 2025 than in December of this year.
In mid-July, the company reached an agreement with consumer advocates to more than halve its requested increase, though it still needs to be approved by regulators to take effect. Duke’s rate of shareholder profit in the proposed settlement was still higher than the national average.
Sometimes, just exploring whether to break off from a utility company can give cities enough leverage to negotiate better terms for their residents, according to a handout from the American Public Power Association, which represents community-owned utilities nationwide.
One example the group cited: the city of Casselberry, 20 minutes north of Orlando. After voting about a decade ago to start buyout proceedings to split from Progress Energy, another predecessor to Duke, the utility sweetened its offer. Casselberry ended up with guaranteed reliability studies every five years, a high utility-paid fee and a clause entitling Casselberry to a better deal if the utility grants one to any other city.
On Monday, Mayor Bruce Rector said that while the half-million dollar cost to pursue a feasibility study is significant, it is worth exploring to see if the city could lower costs and increase efficiency for residents.
“We just want to know if this is a possibility and if that would provide better service to our customers and our citizens in Clearwater,” the mayor said in an interview.