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TRANSFER OF OWNERSHIP FOR GENERATION UNITS APPROVED BY FLORIDA MUNICIPAL POWER AGENCY EXECUTIVE COMMITTEE

12/16/2010 ~ The Florida Municipal Power Agency (FMPA) Executive Committee approved the transfer of ownership for Keys Energy Services (KEYS) Generation units to FMPA during their regular meeting on Thursday, December 9th. The transfer of ownership will take place on January 1, 2011.

The Utility Board previously approved the transfer of ownership on October 13th, and, along with the Executive Committee, approved a companion agreement called the Consolidated Operating and Maintenance Agreement that arranges for KEYS’ Generation staff to operate the units on behalf of FMPA during their regular meeting on Wednesday, December 15th.

KEYS is a long-standing member of FMPA and since 1997 has been a member of their 14-member All-Requirements Project (ARP) which provides wholesale power requirements for the participating cities, some with generating capabilities and others without.

As a member of ARP, and per the terms of their 30-year contract, FMPA is required to maintain enough local generation to power 60-percent of KEYS’ peak power needs in the event they can not import power from the mainland via the Transmission Line (TIELINE). Currently, KEYS has six-generation units at its Stock Island Generation Facility – three owned by KEYS and three owned by FMPA. KEYS operates and maintains all six, while FMPA currently reimburses KEYS Operating & Maintenance and Capital costs associated with their three.

“The original intent of the ARP was to take over the generation of all its members, but given the various needs of the 14-member cities this did not immediately happen,” said Lynne Tejeda, KEYS’ General Manager & CEO. She added that, “FMPA and the respective member cities rededicated themselves to the original intent of the ARP and created the True All-Requirements Project (TARP) concept to see that vision through.”

KEYS was responsible for all the costs associated with its three units – costs include payroll, normal Operating & Maintenance and Capital costs. FMPA pays KEYS capacity credits and variable Operating & Maintenance credits for these units.

“Unfortunately, the costs far exceed the credits,” said Tejeda. “Because local generation is a large expense, KEYS considered retiring its units, which essentially would have forced FMPA’s hand to site additional generation or to purchase our units in order to maintain the 60-percent on-island generation requirement in our contract.” KEYS and FMPA decided to negotiate the TARP agreement to transfer the title of the three units KEYS currently owns to FMPA in order to provide substantial savings to the Utility.

Under the terms of the agreement, on January 1st FMPA will take over the ownership of all generation units at KEYS Generating Facility – KEYS will retain ownership of the Stock Island property – and be responsible for all associated costs, including paying all employee costs.

The regular meeting of the Utility Board took place at 5:00 p.m., Wednesday, December 15th, in the Louis Carbonell Board Room of the William Arnold Service Building, at 1001 James Street, Key West.

PHOTO CAPTION: A computer-generated image of KEYS’ Stock Island Generation Facility.

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