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Council takes next step toward contract for biomass plant

Friday, August 22, 2008 by Mark Richardson

The City Council voted unanimously on Thursday to give Austin Energy the authority to negotiate a contract with Nacogdoches Power LLC to build a $2.3 billion biomass-fueled power plant in East Texas. Negotiators for Austin Energy and Nacogdoches Power will begin work on the contract today and bring it back to council next week for final approval.


Nacogdoches Power LLC will build and operate the 100 MW plant, which will sell all of its power to Austin Energy under an exclusive contract. The facility, located near Sacul in Nacogdoches County, would burn waste to generate electricity beginning in 2012.


The plant is part of the city’s drive to generate 30 percent of its power with renewable energy sources by 2020. Austin Energy is also planning to increase use of wind and solar power to make the deadline.


Council members took action on project in open session after an extended briefing in executive session from the city legal staff.


Several people addressed the Council on the plant, with some expressing concern over spending such as large sum of money, while others encouraged the Council to move forward. Austin Energy General Manager Roger Duncan briefed Council members on a number of concerns that have been raised since plans for the plant were made public.


“Yes, power from this plant is expensive when compared to what we currently pay,” he said. “But all our future options are more expensive than what we currently pay. The value of a base load renewable energy plant is worth the cost involved.”


Duncan also noted that the city is not on the hook for expenses such as construction cost overruns. He noted that the contractor, Nacogdoches Power, was responsible for all construction costs, and that there would be incentives to keep fuel costs down.


Just how expensive power from the biomass plant will be is not yet known, as Austin Energy has not released cost estimates for power generated at the plants. That concerned several people who addressed the Council.


“I have been advocating renewable energy for 31 years,” said environmental activist Paul Robbins. “But this project has not met the higher standard of due diligence with the taxpayers’ money. This is a no-bid contract, and there is no information on benchmarking costs. The fuel costs are not locked in.”


Bill Bunch, director of SOS but speaking as an individual, was also concerned about the lack of competitive bidding on the project. “I would love to be able to cheer this thing along,” he said. “But I have serious reservations about this. None of the arguments that have been put out there for having to hurry this through hold water. It would be worth a small amount of money to study this multibillion project before we commit to it.”


Environmental Defense and the University of Texas Center for International Energy and Environmental Policy both sent letters of support.


Following a short discussion, Council Member Sheryl Cole moved to authorize Austin Energy to open negotiations with Nacogdoches Power and to hire outside legal counsel to examine the deal. Mayor Will Wynn aid the Council will meet in a special called executive session on Aug. 27, the day before the next regular Council session, for a briefing from those attorneys. Final action is scheduled for Aug. 28.


Meanwhile, Duncan also briefed the Council on Austin Energy’s proposed 2009 budget. The proposed $1.3 billion budget contains increases for fuel costs and a request for 37 new employees.


He noted that there has not been a base rate increase since 1994, and that the budget was based on a 2.2 percent annual growth in base revenue. He said that 89 percent of Austin Energy’s revenues come from the sale of electricity.


The budget also includes a $1 billion, five-year Capital Improvement plan that supports energy delivery, power production and customer service. Austin Energy plans to spend almost $350 million of that in 2009.


Highlights of capital spending include a $233 million scrubber for the Fayette Power Plant, $66.9 million to complete the Sand Hill Energy Center, $19.5 million for a new billing system, and $27.7 million to relocate the Energy Control Center.

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