Friday, April 19, 2019 by Elizabeth Pagano

Austin Energy buys biomass plant for $460M

Austin Energy will, in fact, be purchasing the Nacogdoches Generating Facility for $460 million. Buying the East Texas biomass power plant is the city-owned utility’s way out of a controversial $2.3 billion contract that has been under intense scrutiny over the past few years. The 20-year contract has lost Austin Energy an estimated $54 million annually, due to changes in the market that have made other energy sources a far cheaper deal.

That cost was acknowledged in a news release from the utility, which estimated the move will save Austin Energy about $275 million overall. AE is expected to close the deal in the next couple of months, and no immediate changes to the operation of the biomass plant are expected. Husch Blackwell will serve as AE’s outside legal counsel for the purchase.

“Saving $275 million is a great result!” said Austin Mayor Steve Adler. “We play the hand we’re dealt, and here it means we’ll be able to provide value for our customers and maintain leadership on renewable sources of power. We’ve been working since I got into office to get a better financial deal around the biomass plant.”

Council Member Jimmy Flannigan also weighed in on the deal, releasing a statement praising the purchase of the plant.

“There’s been some sound and fury from some notorious corners about what the Council should or could do about the biomass contract. The fact is that in the singular moment when something could be done, our amazing Austin Energy staff rose to the challenge. By prioritizing fiscal responsibility to our ratepayers first, Austin Energy has taken this bold approach to save the ratepayers $275 million,” he said.

Flannigan’s predecessor, Don Zimmerman, memorably launched an “investigation” into the contract, which he derided as a boondoggle. Last year, biomass, wind and solar energy made up 38 percent of Austin’s energy sources, falling short of the city’s 2027 goal to have 65 percent of its energy needs met by renewable resources. A chart breaking down renewable energy sources on the Austin Energy website showed the renewable load on April 18 was 55.5 percent wind and 45.5 percent solar.

Photo by Aashna S [CC BY-SA 4.0], via Wikimedia Commons.

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Key Players & Topics In This Article

Austin Energy: As a municipally-owned electric utility, Austin Energy is a rarity in the largely deregulated State of Texas. It's annual budget clocks in at over $1 billion. The utility's annual direct transfer of a Council-determined percentage of its revenues offers the city a notable revenue stream.

Biomass: Biological material derived from living or recently deceased organisms.

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