Biomass Reality Check

After opponents voice concerns regarding cost and alleged Sunshine Law violations, the power plant project stays on course.


By Chris Eversole

At a city commission workshop in January, opponents of Gainesville’s biomass plant got a long-sought chance to air their views and brought up some details of contract negotiations that had not been discussed before.

Although commissioners took no action at the workshop, they said they stuck by their commitment to complete the contract for the project, which is 75 percent done and scheduled to go into operation by the end of the year.

At the workshop, which was held as part of a settlement lawsuit that Gainesville Citizens CARE brought against the city, attorney Ray Washington argued against the biomass plant, now known as Gainesville Renewable Energy Center (GREC).

Washington provided documents that he claims show that the city commission violated the Sunshine Law in negotiating the contract for the biomass plant.

His presentation included excerpts from records of commission meetings, notes of GRU officials from negotiating sessions and other documents that GC CARE obtained through public records requests and as part of the lawsuit proceedings.

Washington claimed that the documents showed the following:

  • Electricity that the biomass plant generates will cost twice as much as the going market rate for power.
  • GRU’s written presentation at the time the commission approved the contract estimated that the plant would raise the average residential customer’s bill from $4 to $8 monthly, not the current target of $10.56.

Although Ed Regan, GRU’s former head of strategic planning, recommended the company that won the contract over two other contenders because the firm guaranteed a fix price for power, the price escalated above that price. “How can this crazy thing of increasing the price of a fixed-rate contract be justified?,” Washington asked.


Conflicting Views on Cost

Washington questioned whether the city is paying too much for the biomass contract, contending that the commission finalized the contract while it was still gathering information from consultants about costs.

Washington argued that costs of the project actually should have gone down during the year GRU was negotiating the deal—from mid-2008 through mid-2009. One reason he cited was that the economic downturn resulted in a decline in construction work, which should have resulted in contractors cutting their prices to get work.

Another reason the price should have gone down, he says, is the biomass plant qualifies for a $130 million grant, covering 30 percent of qualified construction costs, from the 2009 federal stimulus plan, providing it goes into operation by the end of this year.

At the workshop and in interviews afterward, GRU officials responded to Washington’s claims in the following ways:

Cost of Power: It is true that a report by the U.S. Energy Information Administration estimates that the cost of power from new biomass plants going into operation in 2017 will be nearly twice as high as power from new natural gas plants.

Lewis Walton, GRU’s director of marketing and business services, says these estimates need to be put in perspective. GRU’s contract for the biomass plant keeps the cost of biomass power relatively flat over its 30-year length.

Most of the charges under the contract are fixed. Although the fuel charges are variable, the cost of biomass from tree trimming in urban areas and from waste material in forestry is projected to be relatively stable, Walton says.

On the other hand, natural gas prices aren’t steady, based on supply and demand. “The price of natural gas is down now, but history has shown the price goes up and down with market and regulatory changes,” he says.

The GRU presentation regarding the final contract approval showed a range of potential impacts on customer bills, Walton notes. The current target of $10.56 was the mid-range possibility, with the low possibility being $3.88, and the high possibility being $12.78.

Contract Changes: The original proposal from the biomass plant’s owner was just a starting point for discussions, says GRU General Manager Bob Hunzinger.

Although the original proposal called for a price of $97 per megawatt hour for electricity, he says increases were necessary for the following reasons:

During the year of negotiations on the contract, GRU representatives agreed that it was reasonable to increase the price to $115 per megawatt hour.

The Florida Department of Environment Protection increased requirements for the plant’s emission controls, adding $4.40 per megawatt hour to the cost.

An escalation clause, based on a construction cost index, was added, resulting in a price increase of $2.60 per megawatt hour.

The city agreed to reimburse GREC for its property taxes, adding $10 per megawatt hour to the price.


Sunshine Law Issues

GC CARE sued the city, claiming the commission violated the Sunshine Law in negotiating the contract for the biomass plant.

The organization and the commission agreed to a settlement that permitted the group to conduct a workshop on the case before the commission.

Washington says that one change that was not discussed publicly regarded the dropping of a clause that allowed the city to back out of the contract up to the time that construction began.

During the January commission workshop, GC CARE attorney Marcy Lahart asked how commissioners learned about the clause being dropped.

When asked by Lahart, Mayor Craig Lowe, who was a commissioner at the time of the contract approval, acknowledged that Hunzinger had told him about the change in a one-on-one meeting. “[Hunzinger] said it was not in the best interest of the city,” Lowe said of the clause.


Moving Forward

The commission took no action at the workshop, but most commissioners said they still supported the biomass project.

“Good people made good decisions at the time,” says Commissioner Yvonne Hinson-Rawls, the newest member of the commission. “Over time, we will learn they have made the best decisions for our community.”

Commissioner Todd Chase, who has challenged the terms of the biomass contract, said in an interview that the city should conduct a “summit” with all of the contractors involved in the biomass project to see if the cost to GRU can be lowered.

He also suggested that the city learn from the way the biomass contract was negotiated.

First, all future negotiations should be conducted in the spirit of the Sunshine Law, he says.

Second, the commission should not put negotiations for a contract of great magnitude in the hands of a single city official, as it did with Hunzinger for the biomass contract.

“I’m for diversification of our energy supply, but I have the stone cold realization that it’s a fantasy to say that natural gas will eventually be more expensive than biomass. The biomass contract will drain $40 million to $50 million a year from our community.”


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