ATLANTA - The Florida Power Corp. has agreed to buy the remaining assets of the Sebring, Fla., Utilities Commission for $17.8 million, advancing the commission's plan to forestall default on its outstanding debt.

James Lentz, the commission's financial adviser, said yesterday that privately owned Florida Power signed a contract with the municipal power agency on Monday after the resolution of a month-long impasse involving power rates. He said the agreement was unanimously approved by Sebring's board of directors at a Monday meeting.

"With this agreement, we have passed through a very significant hurdle," Mr. Lentz said. "Now comes what may be the toughest test, which is approval of the Public Service Commission."

Under Florida law, the Public Service Commission, which is the state's utility regulator, must approve transactions that involve a privately owned utility.

Florida Power had balked at buying the system because it objected to a $6 per 1,000 kilowatt-hour difference between the wholesale electric rate it can charge Sebring customers and the cost of that power. Mr. Lentz said that under the sale agreement, Florida Power will seek approval from the Public Service Commission to spread the difference in rates over its entire rate base, which includes 1.5 million customers throughout Florida.

Mr. Lentz cautioned that the agreement is conditioned on the Public Service Commission appointing a hearing officer within 30 days. The officer must then make a recommendation concerning the sale within 90 days.

"What the agreement does is to set out the terms of the sale and give us a reasonable time frame for regulatory approval, " Mr. Lentz explained. He said that if that approval process does not proceed as planned, either party could be released from the agreement.

In addition to the $17.8 million sale price, the agreement calls for Florida Power to extend a $38.1 million loan to the Sebring Utilities Commission. This loan will be repaid by a 10-year surcharge on electric, rates charged to Sebring's customers.

Florida Power officials could not be reached for comment.

The commission plans ultimately to retire $85.6 million of outstanding bonds and to cover $2.5 million of closeout costs. Plans include using the $55.9 million from the sale of the assets and the loan, plus $21.5 million from the sale of the utility's water system to the city of Sebring and $10.7 million in reserve funds.

The city's agreement to purchase the water system is contingent on a completed sale of the electric power system and receipt of the loan. After the commission pays off its bondholders, it plans to dissolve itself.

Unless the commission arranges to pay off the bonds, it will be forced to sharply raise rates after the start of its 1993 fiscal year on Oct. 1 to cover a substantial rise in debt service costs. Commission Chairman Ned Hancock has said that community resistance makes it unlikely that the board would approve a rate increase, obliging the commission to tap its reserve fund and thereby triggering technical default.

The commissions current debt, originally sold in 1986, is insured by AMBAC Indemnity Corp.

The commission has been wrestling with a burdensome level of indebtedness since 1981, when it sold $92.8 million of bonds to build a 41.7 megawatt diesel-steam power plant. Since then, because power demand in the region has lagged expectations, the commission has continually faced the prospect of bond default.

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