in Houston, Texas

Austin Energy customers foot bill – $2 a month per customer for 19 years – for idled biomass plant

Thursday, Feb 14, 2013, 05:33PM CST
By Mark Lisheron
Sam Houston National Forest

Around the clock, seven days a week, in a plant 233 miles away, a full complement of energy professionals stands at the ready to provide wood-fired power to Austin Energy customers.

The staff isn’t sure when they will be needed next. The $128 million plant has produced electricity for less than two of the seven months it has been in operation.

But  for the next 19 years a little less than $2 will be added every month to the bill of the average Austin Energy customer to pay for a plant that, when it does produce energy, produces energy too expensive for any energy company to want to buy.

“It is one of the biggest boondoggles I’ve seen in modern history,” an obviously agitated Tony Bennett says. Bennett is the acting director of the Texas Forest Industries Council. “Just thinking about how they pulled this off makes me mad.”

Bennett was among those who tried to persuade Austin Energy five years ago to think a little bit harder before trying to pull off building a new biomass-burning generating plant in the pine woods of East Texas.

The Council was part of a once-in-a lifetime coalition of consumer and good government advocates, environmental activists, and commercial and industrial interests who came together in 2008 to plead with the Austin City Council to reject the plan.

The City Council unanimously approved allowing Austin Energy to charge its customers to build the plant. The plan allowed for the energy company to enter into a guaranteed contract for 20 years for energy valued at the time at $2.3 billion.

“What is the most disturbing thing to me was that they put this contract through in about two weeks, almost in secret,” Bennett says. “I can tell you it shocked the forest products community at the time, the way they hurried it along.”

The reason for its urgency was that Roger Duncan, then head of Austin Energy, considered the plant a necessary component in his plan for Austin Energy to get 35 percent of all of its energy from renewable sources, spokesman Ed Clark says.

Unlike solar power and wind power, wood or biomass is a source of energy that could be called on in the dead calm of night, Clark says.

“Roger wanted that renewable component that would allow us to have power to dispatch 24-7,” he says.

Roger Duncan and Austin Energy could not at the time the contract was signed in 2008 have anticipated the explosion of hydraulic fracturing that created a buyer’s market for a seemingly endless supply of cheap natural gas, Clark says.

They could have had they listened to several industry experts who were part of a generation plan task force formed by former mayor Will Wynn in 2007, Trey Salinas, a spokesman for the Coalition for Clean Affordable Renewable Energy, says.

At least three of those experts who later helped form the coalition told the task force that most every reliable forecast predicted a protracted period of low natural gas prices driven by technological breakthroughs like hydraulic fracturing.

“They can’t say they couldn’t know because they were told,” Salinas says.

More than two years ago, while the plant was under construction, Michael Webber, who supported the plant as associate director of the Center for International Energy & Environmental Policy at the University of Texas, admitted to Texas Tribune the plant was controversial to begin with and no longer made economic sense.

In spite of the failure of additional federal tax breaks to materialize that would have made biomass more competitive, construction pushed on. Not long after the plant  fired up for the first time this past summer Southern Power, a subsidiary of the Southern Company in Atlanta, acquired it.

By agreement, Southern Power has the plant fully staffed around the clock, ready to serve Austin Energy’s needs, spokesman Tim Leljedal says. In spite of the substantial lack of work, Leljedal confirmed that the company has not reduced staff nor has it been asked to by Austin Energy.

Leljedal declined to say - per the contract - how much Austin Energy customers were paying by the day, week or month when the plant is idle.

Clark confirmed Austin Energy is paying a capacity fee to Southern Power, but would not say what it was, per the contract. But the fee and the contract are little different from those signed with other renewable energy companies in generation arrangements that are increasingly complicated.

At one time, Austin Energy envisioned the biomass plant running 90 percent of the time. Officials have downgraded the outlook to 75 percent and promised the plant would be firing on all burners by this summer, Clark says.

When asked if Austin Energy customers would be expected to cover the shortfall in the $2.3 billion contract, Clark says, “We’re not going to come close to that $2.3 billion figure.”

The problem is, advocates have for five years been unsuccessful in getting Austin Energy to make the terms of the contract public. No one really knows what utility ratepayers are paying for.

“CCARE (Coalition for Clean Affordable Renewable Energy) has always strongly believed that Austin Energy should release the 2008 Biomass contract,” Salinas says. “We do not feel there is a legitimate reason that a signed contract should be kept confidential and held from the public for over four years.”

The Austin City Council is currently deciding on whether or not to hand oversight of Austin Energy over to an independent board.

“We view this biomass plant decision as Exhibit A for why we need an independent board overseeing Austin Energy,” Salinas says.

Contact Mark Lisheron at 512-299-2318 or or on Twitter at @marktxwatchdog.

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Photo from the Sam Houston National Forest by flickr user NixBC, used via a Creative Commons license.

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