City will send Chase to biomass mediation hearing
Published: Friday, May 31, 2013 at 12:55 p.m.
Last Modified: Friday, May 31, 2013 at 12:55 p.m.
As Gainesville stays its two-pronged course in a dispute over the contract involving the new biomass plant, the City Commission has decided to insert a commissioner into an upcoming mediation hearing.
Debate late Thursday night swirled around the prospect of sending Commissioner Todd Chase to attend the mediation hearing scheduled with Gainesville Renewable Energy Center representatives in New York City next Tuesday.
The move eventually passed 4-3, with Mayor Ed Braddy, Chase, Yvonne Hinson-Rawls and Randy Wells in support and Susan Bottcher, Thomas Hawkins and Lauren Poe in opposition.
At the end of Thursday night's nearly seven-hour meeting, city commissioners agreed, with no formal vote, for contracted attorneys and Gainesville Regional Utilities staff to continue to gather information on the potential purchase of the privately owned plant — the outcome now sought through arbitration — and to hold future public meetings to provide updates on the progress.
The city claims that two sales in 2011 totaling an approximately 57 percent stake in the biomass plant constituted a change in control that should have triggered the city's contractual right to make a first offer.
As an arbitration process slowly grinds forward — hearings are not expected until the last months of the year — the city is also pursuing the parallel course of attempting to negotiate a settlement with the corporation that owns the GREC via non-binding mediation.
It was Chase who first raised the prospect of attending Tuesday's mediation hearing. He expressed concerns that the team representing the city — which includes GRU General Manager Bob Hunzinger, other high-ranking utility staff and contracted attorneys with the firm Orrick, Herrington & Sutcliffe — also negotiated the terms of the 30-year biomass contract.
That contract pays $130 a megawatt-hour for power. For the next several years, it will increase GRU electric rates, which are already among the highest in the state at most usage levels.
"I am sending practically the same people who did this up there next week," Chase said as he held up a copy of the contract.
It was Hinson-Rawls who made the motion to send Chase. She noted that the members of the public who frequent commission meetings to oppose the biomass contract have expressed trust in Chase, who has been outspoken in his concerns about the financial impact of the contract during his term.
Commissioner Wells, the swing vote on the issue, expressed conflicting emotions. He said he felt the presence of Chase may not be productive for reaching a settlement via mediation but it could help foster public trust and confidence in the process.
"At the end of the day, the contract that matters is the contract with the community," Wells said.
Hunzinger, who will remain the city's representative in negotiations, attempted to dissuade the commission from sending Chase. He said the presence of a commissioner could cause a problem for GREC representatives and hamper efforts to reach a settlement.
That led some members of the public to step to the podium and allege that Hunzinger was putting the interests of the company ahead of the city. Hunzinger said GRU and its attorneys were committed to working to protect the city and its ratepayers.
Poe said that sending a commissioner to a mediation hearing would set a bad precedent. The city's attorneys cited instances when that happened with former Mayor Craig Lowe.
The commission appointed Lowe to represent it in talks with the School Board chair over a lawsuit challenging the city's stormwater assessment.
The City Attorney's Office requested that Lowe attend a mediation hearing in the lawsuit that business park owner Ropen Nalbandian filed challenging the decision to locate a homeless center near Northwest 53rd Avenue.
In attending the mediation hearing, Chase will be bound by confidentiality and cannot brief the commission or the public on what he learns. The commissioners will receive information on mediation from their lawyers in closed-door meetings.
In an interview Friday morning, Hawkins said GRU staff and contracted attorneys have the expertise to represent the city and he did not feel Chase or any other commissioner shared those qualifications.
"I have confidence in the professionals who have been working decades in utilities," Hawkins said. "Todd does not have those qualifications."
Braddy said he continues to have concerns about the financial viability of the contract and the purchase of the plant when the utility has an approximately $1 billion debt load.
He said he also did not feel that Hunzinger and attorneys with Orrick, Herrington & Sutcliffe adequately answered questions about why the city did not send a notice to GREC alleging it had defaulted on the contract in order to start the wheels in motion toward termination if the firm did not "cure" the violation.
But Braddy said the majority's decision to send Chase to attend mediation was the reason he did not object to staying the course on arbitration for now.
"His participation is a critical step in restoring the trust the people of Gainesville need on this issue," Braddy said.
During Thursday's meeting, members of the public who frequently comment in opposition of the biomass contract reiterated many grievances. There was the removal of the clause to back out of the contract, which the city would have had to exercise before construction commenced, allegations that contract negotiations in 2008 and 2009 violated the Sunshine Law and the fact that the city approved the plant when it does not need additional generating capacity until 2023.
There was also renewed criticism of the decision not to lower electric rates when natural gas prices declined but instead to maintain the current fuel charge on customers to build up a fund now in the range of $23 million that is intended to limit the rate increase when the plant comes online. GRU is trying to hit a target increase of $10.56 per 1,000 kilowatt-hours usage.
Hawkins said Thursday's meeting came too early in the arbitration process and he did not find it productive.
"It was too early in the proceedings," he said. "I felt we didn't cover any new ground. Nothing productive came out of it. At best it accomplished nothing. At worst, it hurt our position" in arbitration and mediation.
Hawkins said he remains convinced that the biomass plant will be of long-term benefit to the city in diversifying fuel sources, moving toward carbon neutrality and reducing fossil fuel dependence, and long-term price stability. Those factors, he said, get lost in the argument that natural gas would be a cheaper short-term alternative.
Braddy, on the other hand, said Thursday's meeting, particularly the decision to send Chase to the mediation, was a "significant and dramatic positive step."