Chamber revises policy stance on biomass plant
Published: Monday, August 27, 2012 at 9:19 p.m.
Last Modified: Monday, August 27, 2012 at 9:19 p.m.
The Gainesville Area Chamber of Commerce board has revisited its stance on the biomass power plant, restating a prior pledge of support while expressing concerns over the potential rate impacts.
The organization, which has 1,200 member businesses, officially notified Gainesville Regional Utilities of its revised position in mid-August.
Michael Gallagher, the chamber’s chairman, said the vote to modify the policy stance was unanimous and came after significant board debate and multiple meetings with Gainesville Regional Utilities officials to discuss the projected rate increases associated with the plant as well as the utility’s strategies to mitigate the impact on customers.
“While we offer our continued support of the project, as we discussed, the Chamber also has a responsibility to its members to communicate some of their concerns as it pertains to the potential adverse impacts of projected utility rates once the biomass plant goes online,” Gallagher wrote in an Aug. 16 letter to GRU General Manager Bob Hunzinger.
In 2009, the City Commission approved a 30-year contract to buy all of the electricity from the Gainesville Renewable Energy Center — the privately owned and operated 100 megawatt power plant now under construction on the property of GRU’s Deerhaven Generating Station. The plant is expected to come online in late 2013.
In March 2010, the chamber board endorsed the project citing factors such as the diversification of the utility’s fuel sources, long-term stability in fuel charges and the economic benefits of job creation at the plant and increased business for the region’s forestry industry.
That statement came two months before the Florida Public Service Commission, after previously delaying a vote when the city’s application looked headed for denial, approved the plant in a 3-2 vote.
“Since that point, a lot of things have changed,” Gallagher said of the 2010 policy statement in an interview last week. “The price of other alternative fuels, in particular natural gas, have come down and remain low.”
Mayor Craig Lowe said he did not see the chamber’s revised statement as a significant change because the business organization had already pushed for affordable utility rates.
“I don’t see how that has changed,” Lowe said. “Before they did not want rates to be excessive and I don’t see how that has changed since then.”
When the city in 2009 approved the contract with American Renewables, the private firm that will own and operate the plant, the expectation was that GRU could sell off half the plant’s output — 50 megawatts — to other utilities for 10 years. That goal now appears difficult to achieve following the drop in natural gas prices and the growth of the natural gas extraction process.
Further complicating the city’s efforts to sell off the electricity, federal cap-and-trade legislation and a state requirement for utilities to have a renewable energy portfolio considered under former Gov. Charlie Crist did not come to pass.
Against that backdrop, the chamber, in its revised policy statement, supported “the implementation of effective cost mitigation strategies by GRU and the Gainesville City Commission to ensure that electric rates remain low.”
The business organization’s statement did not get into detail on specific mitigation strategies that GRU and city commissioners have already put in play or are contemplating. Those moves, which have generated some public opposition, include a bond refinancing that will lower annual GRU debt payments for the next several years but increase them down the road, the decision not to renew an expiring power purchase agreement with Progress Energy, and negotiations with American Renewables to prepay for some power.
As the utility’s fuel costs have dropped, GRU and the majority of City Commission also have decided not to reduce customer rates. Instead, the utility is charging more than 10 percent above actual costs in order to build up a reserve projected to reach almost $22 million by October 2013. That fund is intended to serve as a cushion against the increase in customer’s fuel adjustment charge when the plant comes online.
Gallagher said the chamber wants to see the rate impact limited to the prior projection of $10.56 per 1,000 kilowatt-hours.
The chamber statement said for the area to effectively compete to attract companies and retain the firms here, utility rates “need to remain within a range that is comparable to peer communities and competitive with other electric utilities in North Central Florida.”
Already, GRU, which has a tiered rate structure, has some of the highest commercial rates in the state for multiple levels of usage, according to the Florida Municipal Electric Association’s monthly comparison for July.
The FMEA report showed that GRU had the highest commercial rates in the state in July for 1,500 kilowatt-hours usage and either the second- or third-highest rates for 6,000 kWh, 10,000 kWh, 15,000 kWh and 30,000 kWh.