Biomass or Bio-Mess? Part Four: Counting the Cost
With the Gainesville Renewable Energy Center set to go online by the end of the year, many customers of Gainesville's public utility are wondering how the 100 megawatt biomass plant will affect their monthly bill. When the plant comes online, GRU will begin purchasing power for at least $103 million annually.
"The overall impact on a customer will be about a penny a kilowatt hour, or as we've kind of said, a little over $10 per your typical user of 1000 kilowatt hours a month," said GRU General Manager Bob Hunzinger.
$10.56 to be exact, the same number quoted by GRU staff during the contract presentation in May 2009. At the time, GRU was counting on both federal carbon regulation, and a possible deal with GREC to prepay for the energy, to push that number lower, near $6 for the average customer.
But since that time, talks to prepay have stopped. And the lack of any carbon regulation has kept the price of biomass power relatively high compared to other forms of energy.
"we feel pretty comfortable with those numbers, " said Hunzinger. He remains confident the utility can keep the impact to no more than $10 a month, although he says other steps have had to be taken reach that number. "There's a lot of things that we've done to help reach that target. So for example, refinancing that was done this past summer."
A refinancing of some of the utilities' debt, an action that helped free up close to $10 million. The utility may also take another $10 million from a capital improvement fund called UPIF. The money will go towards paying off some of the initial costs associated with the biomass plant.
"We want to make the electric portion of the bill as as small as we possibly can, by using whatever means we can. And some of those, we've used some things like the refinancing. We won't renew contracts, like the Progress Energy contract, which is a savings," said Hunzinger.
But some worry these steps may cause more harm than good.
"The important point for people to understand, is not whether we get to $10.56, its how we get to $10.56," said Gainesville City Commissioner Todd Chase.
He says actions taken by GRU, like refinancing debt, may help lower the rate impact now but could end up hurting the utility and it's ratepayers in the long run.
"If it's $10.56 the first month that the plant is running, that's one step. But the important thing is that we have this thing for 30 years, and what I'm afraid that we have done, and what we're continuing to do, is place our utility in a very precarious financial situation," said Chase.
When the credit ratings agency Moody's reaffirmed the utility's Double A (AA) rating last summer, they warned that any continued use of capital improvement, UPIF funds, could lead them to downgrade the utility in the future. Just weeks later, fellow ratings agency Standard & Poor's downgraded GRU's debt one notch to Double A minus (AA-).
"We talk to ratings agencies every year, with an update, or any time we do a bond deal, you know, they rate our debt, and we're a double A rated utility now. So I think that speaks that, the financial plan that we have is good," said Hunzinger.
"There are many things that have to happen, for this thing not to become a tremendous, tremendous financial strain on our city," said Todd Chase.
He worries that if current market situations do not change, and biomass power remains noncompetitively priced, ratepayers could be stuck footing the bill.
"I think that a public utility making a bet this large on things that ultimately are purely speculative in nature, is not the way a utility should be run," said Chase.
Former Gainesville mayor Pegeen Hanrahan, a strong biomass supporter, says anyone worried about the plant's impact on their monthly bill can take measures to lower it.
"The thing to understand about utility costs, is that you have control over them. Your property taxes, you have virtually no control over. But your utility costs, if you don't like how much you're having to pay in utility costs, you can take actions. Most substantially, changing the thermostat, for example, but also changing the lighting, the insulating, and all these other things," said Hanrahan.
But Commissioner Todd Chase says he doesn't agree with that assessment.
"I think that is about as out of touch with society as you can be. To suggest to some senior citizen, who runs an oxygen machine 24 hours a day just to stay alive, to use less to save money, is missing the point. And so when I hear that it upsets me, because its a justification by people who got us in this situation," said Chase.
"Those people" stand by their decision-- in the face of such criticism.
Which means the biomass plant will continue to generate controversy, even after it generates actual electricity.
- Biomass or Bio-mess? Part 2: The Contract
- Biomass or Bio-mess? Part 3: The Austin Example
- Biomass or Bio-Mess? Part One: The Basics
- BioMass Plant: Silenced Committee Member Speaks Out
- Gainesville City Leaders Discuss Ownership of Possible Bio-Mass Power Plant
- Part Four: TV20 Sports Interviews Tim Tebow
- City will not have part in biomass lawsuit
- Dan's Day Trips Part Four
- Five For Four: Handful of Local Girls Basketball Teams Within Reach of the State Final Four
- Lake City Residents Cleanup Mess Left Behind by Severe Storms