The biomass plant being built to serve Gainesville Regional Utilities customers is forcing the utility to rearrange its finances, including refinancing part of its debt.
Two of the three bond rating agencies that the city uses have lowered their opinions of GRU. Standard & Poor’s downgraded GRU’s outlook to “negative,” although it maintained GRU’s AA rating. Fitch Ratings downgraded its rating of GRU’s $932 million in bonds to AA- from AA.
On the other hand, Moody’s Investor Service left GRU’s rating unchanged, at AA, with a stable outlook.
The implications of these moves depends on who you ask. Mayor Craig Lowe and the five city commissioners who approved the refinancing plan say the juggling of GRU’s finances is a necessary result of changes in the energy landscape since the city decided on the biomass plant.
Commissioner Todd Chase and longtime opponents of the biomass plant see the financial moves as confirmation that their warnings about the project were right.
All three rating agencies noted that GRU is having trouble with its plans to sell half of the production of the 100 megawatt biomass plant, which is being built by Gainesville Renewable Energy Center. The plant’s production isn’t competitive with power generated by natural gas, the price of which has plummeted.
Moody’s applauded GRU for its response to this problem, noting that the utility is diversifying its energy production by adding the biomass plant and forecast that it will be able to meet its goal for rates. That goal is that rates for the average home, using 1,000 kilowatt-hours, will increase no more than $10.56 a month when the biomass plant goes into operation at the end of next year.
“We are pleased to see these high ratings, but we also recognize and take their concerns seriously,” said GRU Chief Financial Officer Jennifer Hunt in a press release. “We work hard to balance those concerns with the needs of our community to provide reliable, long-term solutions that will serve our customers for years to come.”
In addition to the debt refinancing, GRU plans not to renew an agreement to purchase power from Progress Energy—which costs $12 million annually—when the agreement expires at the end of next year, Hunt said.
GRU is asking the city commission to consider using money from its reserves for capital projects to pay off some of the debt from the bond refinancing from 2014 to 2019. The commission, which has already approved the debt refinancing, will consider GRU’s next year’s budget when it meets at 10am today (July 11).
GRU is proposing that its base rate electric rates not increase next year, spokesperson Katie Weitekamp says. The utility is proposing a reduction in natural gas rates, which would result in a savings of $1.73 on the average bill. The average water bill would go up 95 cents, and the average sewer bill $1.50, under the proposed budget.
Additional reporting by Chris Eversole