Clearwater council advances appraisal after NewGen study finds potential savings from municipal electric utility

Clearwater City Council on Sept. 29 voted unanimously to authorize an appraisal and further work on whether the city should form a municipally owned electric utility after a presentation of a feasibility study by NewGen Strategies and Solutions.

The council’s decision follows a detailed feasibility presentation by Scott Burnham, partner with NewGen Strategies and Solutions, who told the council “our feasibility suggests that Clearwater would, in fact, have what we call a lower effective all‑in rate” than the investor‑owned utility that now serves the city.

The vote moves the city into a next phase — an appraisal and potential negotiations with Duke Energy — rather than committing to purchase. Councilmember Ryan Cotton, who made the motion, framed the decision as more than dollars and cents: “This is about sovereignty,” he said during debate.

NewGen findings and why the council moved forward NewGen’s analysis compared the cost to operate a city distribution system — including purchase of distribution assets, bond financing, startup and reintegration costs, and ongoing operations — against projected Duke Energy retail rates. The study modeled a 30‑year period starting 2026 and estimated a Clearwater MEU effective all‑in retail rate of about 12.94¢/kWh in year one versus roughly 14¢/kWh for Duke, producing a sample residential saving of about $17.70 a month for a 1,000 kWh customer in year one in the study’s assumptions.

The presentation detailed key components the study used: - Estimated reproduction value (new less depreciation) for distribution assets: $572,000,000 (NewGen estimate). Concentric Energy Advisors, the consulting firm used by Duke, presented a higher valuation scenario with a high‑end estimate of about $1.11 billion. - Start‑up and transition costs: NewGen used a startup estimate of roughly $133 million and separation/reintegration costs in the tens of millions (NewGen cited about $70 million in one slide for separations in higher scenarios). - First‑year modeled costs (2026): operating costs about $142 million, non‑operational contributions/franchise replacements about $19 million, and debt service about $47 million, producing total cash needs near $230 million and the study’s all‑in rate result.

NewGen explained several reasons a municipal utility could offer lower effective rates: ability to issue tax‑exempt (non‑taxable) revenue bonds for parts of the capital, lack of shareholder return requirements, and exemption from federal and state income tax. The firm also assumed the new utility would buy wholesale power and transmission services — not own generation or transmission — and would acquire only Duke’s local distribution assets.

Legal, boundary and risk assumptions Scott Burnham told council members NewGen’s feasibility model assumes Clearwater could serve the city’s enclave areas and some irregular boundaries and that those assumptions materially affect costs. He said the study assumed the city could purchase distribution assets and buy wholesale power from regulated sources; he noted there are federal and state regulatory processes (Federal Energy Regulatory Commission and Florida Public Service Commission) that would govern wholesale transmission and rate matters.

City Attorney David Margolis and NewGen referenced past litigation and regulatory rulings in Florida (including the Winter Park case) when discussing what happens if the existing franchise agreement expires: the transcript records that the city would operate under “status quo” if no purchase or new franchise is in place when the current franchise ends Dec. 31, 2025. The city attorney advised that the matter has been litigated previously and that the Florida Supreme Court has spoken to similar issues, but councilmembers said they would obtain specific legal advice if the process continues.

Public comment and Duke response More than a dozen residents and numerous Duke Energy employees spoke during public comment. Duke representatives emphasized the company’s storm response capabilities, customer assistance programs, and community contributions. Katie Christian, director of government and community relations for Duke Energy Florida, said Duke believes it is “in the best position to serve the customers of Clearwater.”

Duke employees and managers who spoke described large mutual‑aid deployments for recent storms, vegetation‑management improvements, and technical capabilities such as SCADA and “self‑healing” network features that, they argued, reduce outage times in Clearwater’s underground and coastal network segments.

Residents and community speakers expressed a range of views. Some urged the city to pursue public power to lower rates and retain local control; others warned about the complexity, transition risks and litigation, and urged continued cooperation with Duke. Speakers emphasized concerns about storm resilience, costs of litigation, impacts to nonprofit funding provided by Duke, and how any change would affect low‑income residents.

What the council approved and next steps Councilmember Ryan Cotton moved to proceed to the next step — an appraisal and related preparatory work — so the city can negotiate or evaluate a purchase price and, if necessary, enter franchise negotiations. Mike Menino seconded the motion. The council voted unanimously to proceed.

NewGen and city staff outlined the likely next steps if appraisal proceeds: obtain an independent appraisal of distribution assets; open negotiations with Duke on a purchase price and a wholesale power agreement; and perform additional legal, engineering and financial due diligence. NewGen highlighted “off‑ramps” — points in the process where the city could pause or withdraw before committing to a purchase.

Clarifying details captured from the meeting - Franchise status: Current franchise agreement with Duke negotiated in 1995 and expiring Dec. 31, 2025 (transcript). The city attorney said status quo would continue if no voluntary purchase or new franchise is signed. - NewGen high‑level numbers: NewGen presented an asset valuation (replacement cost new less depreciation) of about $572 million; Concentric (hired by Duke) presented alternative high estimates (up to about $1.11 billion). NewGen startup costs ≈ $133 million; sample first‑year total cash need ≈ $230 million (operating + non‑operational + debt service). Debt service line in year one ~ $47 million. - Modeled rate impact: NewGen’s modeled effective all‑in rate ≈12.94¢/kWh in 2026 vs. Duke ≈14¢/kWh; sample residential savings ≈$17.70/month for a 1,000 kWh user in year one; sample commercial savings ≈$115/month for a 10,000 kWh user in month one (per the NewGen slides presented).

What the vote does — and does not — decide The unanimous council vote authorizes staff to pursue an appraisal and next‑step activities (appraisal, negotiations, additional due diligence). It does not authorize a purchase of assets, does not terminate the franchise agreement, and does not change rates. Councilmembers repeatedly emphasized the appraisal is an information‑gathering step; any subsequent purchase, litigation, or change would require further council action.

What remains uncertain NewGen described the analysis as a feasibility estimate, not a final valuation or deal. Several variables could materially change outcomes: (1) the appraised value for distribution assets; (2) the city’s ability to serve enclave areas and the cost to do so; (3) any litigation or negotiation outcomes with Duke; (4) the final structure of bond financing and debt service; and (5) decisions about customer rate design and community support programs.

What the public should expect next City staff and the consultants will return to council with an appraisal and recommendations before the city takes any purchase action. The city attorney emphasized the process includes multiple decision points and legal checks, and both the city and Duke retain opportunities to negotiate a franchise renewal as an alternate path.

Ending Council members said they wanted more detailed, independently sourced appraisals and legal analysis before making any purchase decision. The appraisal authorized by the vote will narrow the range of outcomes and provide the council and public with clearer numbers for any future vote.