Biomass or Bio-mess? Part 2: The Contract
It was approved by the city commission more than three years ago, yet Gainesville's billion dollar biomass contract remains the subject of much discussion.
After settling on biomass as Gainesville's next means of electricity generation, the city commission unanimously passed a motion in May of 2008, authorizing it's public utility to begin negotiations with private companies to build the biomass facility and purchase power from it.
"The power purchase agreement negotiations were conducted over a year period," Jim Gordon, GREC CEO said.
Jim Gordon is the head of GREC, or as it was known at the time, "Nacogdoches Powe". Their proposal was ranked number one, according to a set of standards set by the city commission.
Former Gainesville Mayor, Pegeen Hanrahan said, "The utility staff were the ones who recommended that we select GREC as the appropriately responding company."
Before the motion to move forward with negotiations could pass, then-commissioner Jack Donovan had one concern.
He said, "If we go forward with a contract, we need a contractual back door to bow out."
A back-out clause that would essentially allow the utility to exit the deal before the plant goes online, something GRU staff said was standard in contracts like this.
Ed Regan said, "I will tell you this is normal in a contract. It's something that does need to be negotiated."
This now-public memo sent from Nacogdoches to GRU shows developers at one point were willing to include a termination clause, but when the final contract was approved one year later, the clause had been removed, which to some put the city in a more risky position.
The CEO of GREC, Jim Gordon had this today; "This is a clause that was carefully thought out. The cost would have been too high to the community."
"There were a lot of things that went into the contract, a lot of things that were discussed at various points in the contract, and so we have the contract as it exists today. I'm not sure if it would be good to back and parse out any particular, individual component of the contract, and try to talk about that and how it did or didn't happen," Bob Hunzinger said.
But opponents of the plant, like Gainesville resident and PSC Intervenor Paula Stahmer say the removal of the backout clause is one example of city putting GREC's interests ahead of its utility customers.
"For whatever reason, the city commission had identified its interests with GREC. Every allowance was being made for GREC, all of the accommodations were being made for GREC," Paula Stahmer said.
Other aspects of the final contract include terms by which GRU can sell half of the plant's expected output, something Hunzinger admits has not been easy, considering the cost of biomass production is high.
"We've had a number of bids to various entities that have been looking for power. We haven't been successful in any of those to date, so we're still working on additional ones," Bob Hunzinger said.
The contract's terms last for 30 years, up from the initial 20 years contained in GREC's proposal. It also outlines both the fixed and variable costs GRU will pay for energy once the plant goes online, but when the final contract was being considered, those exact costs and other information was redacted from public copies.
"The contract was substantially confidential," Paula Stahmer said.
Opponents say the redacted information kept the public from having any substantial input in the public discussion.
"Since it became public, the commission has been resentful of all our entreaties to have some meaningful discussion," Paula Stahmer said.
"We've been in the business for close to 40 years, and we've built up some intellectual property," Jim Gordon said.
The head of GREC says parts of the contract had to be kept from public view in order to protect the company's trade secrets.
"We just don't want to give our competitors a roadmap to what we're doing," Jim Gordon said.
"Trade secrets, what trade secrets? There aren't any trade secrets in that," Dian Deevey said.
But Dian Deevey, another intervenor in the plant's PSC approval says GREC took advantage of trade secret law in order to keep the true impact of the plant hidden.
"You can claim trade secrets and have something redacted without ever having to prove that they are in there," Dian Deevey said.
But Former Mayor Hanrahan says terms of the contract had to be kept secret in order to protect the ratepayers.
"If the contract had been completely open and unredacted, it actually would have been possible for fuel suppliers to figure out how to game the system, which again, would have driven the cost up," Pegeen Hanrahan said.
But some critics don't buy that argument.
"We had a secret contract, we had secret negotiations. This is 4 billion dollars in a state that is known for having open transparent processes," Dian Deevey said.
"A lawsuit was filed last year by two Gainesville residents who claimed Florida's open records laws were violated during the contract negotiations. That dispute was settled when opponents were granted a public meeting earlier this year.
The city of Gainesville and GREC remain in arbitration talks after city officials claim GREC violated terms of the contract by selling some of its stake in the plant.
Biomass or Bio-mess? Part One http://www.wcjb.com/local-news/2013/02/biomass-or-bio-mess-part-one-basics
Biomass or Bio-mess? Part Three: The Austin Example http://www.wcjb.com/local-news/2013/02/biomass-or-bio-mess-part-3-austin-example
- Biomass or Bio-mess? Part 3: The Austin Example
- Biomass or Bio-Mess? Part Four: Counting the Cost
- Biomass or Bio-Mess? Part One: The Basics
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