ATLANTA -- The Sebring, Fla., Utilities Commission faces a showdown meeting next week that could finally resolve its future -- and the fate of the $91 million of AMBAC Indemnity Corp.-insured bonds the troubled utility still has outstanding.

In a meeting set for next Thursday, Sebring's financial adviser will recommend whether the utility should sell its remaining assets, redeem its bonds, and dissolve itself; or choose one of two alternatives that would allow it to remain in business and refinance the bonds.

If the utility does not move quickly on one of the three current options, warned James L. Lentz, its financial adviser, it faces "very substantial" rate increases to pay off a crushing escalation in debt service costs, which will rise to $15.4 million a year by 1996 from about $10 million this year.

This rate increase, which will lift the average ratepayer's bill from the current level of $110 per 1000 kilowatt hours to about $135 starting in late 1992, could further fan the resentment of Sebring residents who already must shoulder rates that are among the highest in the state, said Mr. Lentz. Some of those ratepayers have called for the utility to default on the bond issue, he noted.

"We are still putting together numbers on which is the best option, but whatever is decided I think the utility has to move quickly given the depth of public sentiment on the issue [of rate increases]," said Mr. Lentz, executive vice president of Fray Municipal Securities Inc. in Orlando. "It is far better that we deal with these questions now than having to deal with them later in court."

Under the first of three possible options currently available to the commission, Florida Power Corp. has offered an outright takeover of the utility's remaining assets -- its distribution system and rights to its customer base -- in exchange for a cash payment of $10.2 million and a $42.3 million loan.

To this total of $54.7 million, the utility would chip in $36.3 million, allowing the uninsured bonds to be called immediately. The $36.3 million would come from $12.6 million in a reserve account, $2.4 million of other assets, and $23.5 million the utility is counting on from the sale of its water system to the city.

This option would close down the commission. Sebring's utility customers would then be served by Florida Power, which would add a $27 a month "transitional fee" to ratepayers' average $72 per 100 kilowatt hour bill for a period of 15 years in order to pay off the $42.3 million loan.

Approval of both the city council and Florida's Public Service Commission would be required.

Under a second proposal, Tampa Electric Co. would take over management of the utility. SUC would retain its assets and refinance the insured bonds, which would extend the maturity of that debt beyond the present final due date of 2020 and thereby lower annual debt service costs.

The third proposal, also from Tampa Electric, would also allow the commission to continue in existence. It would provide the commission with $9.5 million for its assets and a $45 million loan. This, together with the commission's reserves and the $21.5 million in proceeds from the sale of the waterworks, would permit SUC to eventually call all its bonds.

Although Mr. Lentz would not say which proposal he favors, he did note several advantages provided by the Florida Power offer. "This has the clear virtue of being the cleanest proposal," he said. "It also allows the utility to get out of the picture, which seems to be the direction of public sentiment right now."

Patricia Wilk, a council member, unequivocally endorsed the Florida Power proposal. "People want out of SUC, after all the burdens it has imposed on the community," she said. "The Florida Power offer seems to provide the best chance to do this," she said. Ms. Wilk warned that if the SUC is not dissolved, however, the council may move to do so itself.

Mr. Lentz said the utility is either going to have to sell out or refinance its $93 million of debt soon or face "dramatic rate increases." The upcoming decision facing the utility could bring to an end the eight years of fighting off the specter of insolvency.

In 1983, two years after it sold $92.8 million of bonds to build a 41.7 megawatt diesel/steam power plant, it found that revenues would fall short of the debt coverage requirements. After a bridge financing was arranged in 1984 and 1985, the utility restructured its borrowings in 1986, selling $115.2 million of debt in two series; $94.3 million of AMBAC-insured bonds and $21 million of uninsured bonds, then valued at about $21 million.

Since then, it has continued to experience lower-than-expected demand and mounting debt service costs. Last March, it moved to begin reducing those costs by selling its power plants to Tampa Electric Co. and using the proceeds from that sale to redeem the uninsured bonds.

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