Gainesville ratepayers complain about biomass plant costs

The costs of power from a 100-MW, biomass-fired power plant are at the center of a July 16 complaint filed at the Florida Public Service Commission against Gainesville Regional Utilities by a group of ratepayers led by Eye Associates of Gainesville LLC.

They wants the PSC to make an expedited review of the electric rate structure of Gainesville Regional Utilities (GRU). “Petitioners request for expedited review is based upon the results of the cost of service study initiated by GRU, and the electric rate structure changes that GRU has recently proposed to implement effective October 1, 2013,” said the filing. “This petition may be subsequently amended to add additional petitioners.”

GRU electric rates are among the highest in Florida, the petitioners said. As an example, a GRU non-demand business customer using 1,500 kWh per month paid approximately $71.23 more per month than a similar FPL customer in December 2012. In 2014, GRU is expected to have the highest electric rates in the state of Florida across all rate classes, the petitioners said.

GRU has significantly overcharged its customers for fuel over the past three years in violation of its own unwritten internal policies and City Ordinance in order to “hide” the true rate impact of the GREC contract, the petition claimed.

In April 2009, GRU entered into a $3.1bn, 30-year contract to purchase 100 MW of biomass power from the GREC facility at a cost of about $130 MWh, the complaint said. GRU has recently admitted that the monthly residential rate impact from the GREC contract is approximately $30 per 1,000 kWh on a standalone basis, it added. “To date, GRU has been unable to sell any of this excess power at the same contractual price that GRU customers are obligated to pay,” the complaint said. “The cost of purchased power will be recovered through the fuel adjustment charge. The annual cash payment obligations under the GREC contract are approximately $102.5 million per year beginning in 2014.”

The Federal Energy Regulatory Commission on May 23 approved market-based rate authority for Gainesville Renewable Energy Center LLC (GREC) for its 100-MW biomass-fired power project in Florida. The project will sell 100% of its output to the city of Gainesville, Fla., d/b/a GRU.

“The Project is scheduled to become energized and begin flowing test energy in mid-July 2013, and will begin commercial operations shortly after that point,” said the GREC filing at FERC. “The ‘Eligible Facilities’ will consist of a wood fuel handling system, a bubbling fluidized bed boiler, a steam turbine generator and a 4,500 foot single-circuit transmission line interconnecting the Project to GRU’s distribution system. GREC is simultaneously filing an application for market-based rate authorization with the Commission. GREC is wholly-owned by GREC Intermediate Holdings, LLC, which in turn is wholly-owned by GREC Holdings, LLC.”

GRU on July 12, in unveiling this planned rate hike, said in a statement: “The key factors behind the electric rate increase are declining sales over the past several years and the addition of biomass energy as a fuel source. The addition of biomass to GRU’s fuel mix will help the utility manage the projected price increases and volatility associated with fossil fuels and meet anticipated environmental regulations. This will help create long-term cost savings and price stability for customers.”

“We are doing everything we can to be more efficient and minimize the rate impact on our customers,” said GRU General Manager Bob Hunzinger in the July 12 statement. “Our employees remain dedicated to providing safe, reliable services in an environmentally responsible manner.”

A GRU budget letter released July 12 said: “With the beginning of the transition of local, renewable biomass energy from the Gainesville Renewable Energy Center (GREC) into the rate structure, staff is recommending a decrease in the base rate components and an increase in the fuel component. For the typical GRU customer comparisons, the anticipated increases will range from slightly over 8 percent for residential customers to 11 percent or less for commercial customers, depending of course on the actual level of usage.”

The budget letter added: “The Gainesville Renewable Energy Center (GREC) is almost complete and is on schedule to become commercially operable in November.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.