Bielarski: Why GRU had to be taken away from the City Commission, Part 2
Letter to the editor
Part 2 – Why the buyout was necessary
As told through excerpts from my book, “The City that lost Control – the true story of how greed, deception, politics and a battle over green energy shattered a community“
Excerpts from Chapter 5 – The contract doesn’t pass the sniff test
“Outside of the GRU Administration Building’s imposing brick facade, the ills surrounding the biomass PPA were spreading like a virus long before the COVID-19 pandemic. The public’s awareness of the awful deal the utility had executed, as approved by the previous commissions, had grown to a fever pitch. It manifested itself in a series of historic elections that changed the ideological balance of the commission in 2015.
“From 2011 through 2014, more fiscally conservative local politicians were elected to the Gainesville City Commission, such as former Navy pilot Todd Chase, businessman Craig Carter, and Republican leader Ed Braddy. These new faces brought voices that openly questioned the biomass PPA, Solar FIT, and the lack of fiscal responsibility often displayed from the dais. Without these commissioners, I would not have become the new general manager.”
…
“In response to the heightened public outcry over the biomass PPA, the City was shaken out of its lethargy – it was time to take an objective look at what had happened. In late 2014, they engaged independent professionals, Navigant Consulting LLC, to investigate what had gone wrong with the biomass PPA to, in their words, ‘perform an independent assessment and evaluation of GRU and its dealings with Nacogdoches Power LLC and the long-term Power Purchase Agreement (PPA) entered into between the City of Gainesville and GRU.’
“The investigation was completed just before my arrival, and the final report, dated April 15, 2015, was presented to the commission. While the report was only 179 pages long, it was supported by 65 three-ring binders full of backup information stored in the cabinets within the general manager’s office. The report told the biomass PPA story through the lens of new, crucial information for all interested parties to read. Its thoroughness presented a clear timeline and accounting of GRU’s selection of Gainesville Renewable Energy Center (GREC) as the vendor up through the negotiations and finalization of the biomass PPA. My intellectual digestion of the full report gave me physical indigestion while I cringed in disbelief.”
…
“The ugly truth about the GREC PPA was that it obligated GRU to pay seventy-four million a year, whether GREC delivered the energy or not. The tagline (delivered by Mayor Hanrahan) that GRU would only pay for the energy delivered conveniently dwarfed the material monetary exposure the utility would have to pay for capacity when GRU didn’t need it. Failure to disclose this risk during the Commission meetings was inexcusable.
“All told, the negotiations produced eight formal revisions between the Binding Proposal and the final GREC PPA. In virtually all the revisions, GRU ended up incurring more costs and/or more risk for little or no benefit. Here are the gory details, one by one:
- The final term of the PPA increased by 50% from twenty years to thirty years.
- Our right to make a first offer to purchase the biomass plant was given up for a grant of the right of first refusal.
- The right to terminate the PPA for convenience was lost in negotiations.
- An increase in construction costs was accepted through an obscure construction cost adjuster.
- The responsibility for ad valorem taxes on the project, estimated at approximately 5 million dollars a year, was accepted.
- Capacity charges were redefined as available energy payments grew from 48 million dollars to 65 million dollars a year.
- Overall fixed costs of the PPA increased from 936 million dollars to over 1.9 billion dollars.”
…
“I was astonished at the sheer weight of the adverse negotiation outcomes. In return for all the concessions, GRU received nothing of any consequence. It was as if there had been no quid pro quo. Instead, it was a quid pro GO! The GREC PPA had obligated GRU to pay GREC up to seventy-four million dollars a year, whether they generated electricity or not. Over the expanded thirty years of the GREC PPA, GRU was faced with over 2.2 billion dollars of future payments. This hadn’t been a negotiation! Rather it was a confiscation!”
…
“It was under this historic umbrella that I voiced my first public thoughts concerning the GREC PPA. During the July 20, 2015, City Commission’s evening session, in response to a question from Jim Konish, I said, ‘The contract (GREC PPA) doesn’t pass the sniff test. I’m sorry.’ After an audible gasp, you could hear a pin drop. Packed into that comment was the validation to the community that I, indeed, questioned the way in which the GREC PPA had been negotiated and foisted upon them.”
…
Thus began my quest to negotiate a way out of the biomass PPA, against the headwinds of political forces that wanted me to fail, for the biomass PPA to remain, and for former Mayor Pegeen Hanrahan’s legacy to remain.
Excerpts from Chapter 16 – GRU plays a weak hand strong
“On November 7, 2017, we executed the City’s largest bond issuance ever and took ownership of the biomass plant as we terminated its onerous PPA.
“The benefits of the Biomass Buyout were without precedent. GRU plant personnel were able to modify the plant (now called Deerhaven Renewable), making it feasible to operate as low as 30 megawatts. With that flexibility, GRU was able to avoid frequent dispatching of its other older generating assets.
- The plant’s operating cost reduction fell right to the utility’s bottom line. Total operating expenses fell from 290 million dollars in fiscal year 2017 to just over 240 million dollars in fiscal year 2018.
- The Biomass Buyout allowed us to reduce overall electric rates between 8 to 10%, driving rates to the lowest level the utility had experienced in a decade.
- GRU’s long-term debt was reduced by almost three hundred million dollars from its peak.
- The Biomass Buyout resulted in GRU’s annual obligations plummeting to 38 million dollars a year from 74 million dollars a year.
- Nominated by Goldman Sachs as the Deal of the Year in 2017, the financial community extolled the virtues of the buyout.”
…
“Little did I know that thirty days later, the luster of my grand accomplishment would wear through Gainesville’s political fabric. No longer a dignitary aboard a vintage Corvette (On the day of the completed deal, I rode on the back of my Chief Information Officer’s Corvette as everyone gathered to celebrate at the plant), I’d be yesterday’s news for the City power brokers as I’d be fighting for my career in front of people who had yet to build one.”
Excerpts from Chapter 22 – It’s not a threat
On January 27, 2022, at a General Policy Committee meeting, then-Commissioner Ward made the motion to fire me:
“Slowly and methodically, Ward laid out his ‘thought process.’ He began by acknowledging that I had ‘successfully and creatively saved our City 900 million dollars and changed the Deerhaven Renewable plant from a rarely used curiosity into one of our least expensive, most productive energy producers. That was in 2017, and it remains a very big deal. It was an audacious and audaciously successful effort.”
Click here to read Part 1 – How it began
Next up – A Wartime Consigliere
GRU CEO Ed Bielarski, Gainesville
The opinions expressed by letter or opinion writers are their own and do not necessarily represent the views of AlachuaChronicle.com. Assertions of facts in letters are similarly the responsibility of the author. Letters may be submitted to info@alachuachronicle.com and are published at the discretion of the editor.
Way to go Ed! Only way to stop the loony Leftists is to cut off the $$$ so they can’t steal it and waste it on their socialist agenda BS.
Keep up the Good Work!
DO NOT GO BACK UNDER
CITY CONTROL!
THEY WILL RAISE RATES AND LIKE DRACULA, SUCK $$$ FROM ALL RATE PAYERS!😢
Attention seek much? Yawn.
Blah, blah, blah, blah, blah.
Me, Me, Me
I, I, I
I’m Ed… I rode into town and singlehandedly
saved the world.
Absolutely nauseating.
With so much shameless self-promotion it’s shocking that you haven’t self nominated yourself for a Nobel Peace Prize 🏆.
Perhaps you have amnesia? Go watch the City Commission videos where you said the exact opposite and disparaged citizens who pointed out the obvious long before you to rode into town -and claimed to save the world.
You have zero credibility when you play both sides and write pulp fiction.
Eastman misrepresents facts, but effectively points out the hypocrisy of your conflicting current and former statements.
Time for breakfast Susan.
What are they feeding you in City Hall that makes you keep going back for more?
Dear You Voted For It;
I think you are confusing that Susan with me. I don’t know who that person is but unlike them and you, I use my real full name when I post. How about it? Who are you?
My apologies if I mistakingly thought that “Susan” was you. Glad you backed away from the trough long enough to correct me though.
Spoil all the fun? No thanks. Unlike you, I actually have to work around this blue infestation that to the detriment of many, continue to invite more homeless, pursue GRU profits, and continue their financial waste. I guess as long as they keep feeding you, they’ll have your support.
Susan, my apologies to you for incorrectly thinking you were the one who has been instrumental in the continued botching up of Gainesville. Take care!
Coming from someone who never gets tired of the sound of her own voice and thinks her opinion is the only one that matters in this town. You really do have an over inflated sense of your self worth.
Back it up Susan or you are just another talking head with an agenda that simply refuses to do the hard work of actually supporting your tired out party politics narative. Eastman as your quoted authority? That sums it up nicely. Nobody’s perfect and mistakes will be made. We need to move forward as a city and you and your supporters just want to go back to what we know didn’t and won’t work for the better. Stuck are ya?
None of the commissioners except the two funeral home owners have business experience to run GRU. Maybe they want to use it for cremations?
Seems like some commissioners should have faced criminal charges on that original biomass deal.
Bielarski referenced the 2015 Navigant Report but conveniently omitted their recommendation on the topic of governance (page 177). Here is verbatim what that report said:
“Navigant would suggest that it may be more practical to reconstitute the existing GEAC to serve as a utility advisory board, using many of the characteristics provided above.
By taking this approach, the Commission might be able to more quickly establish a qualified and effective advisory board that can focus its time on the issues of greatest importance to the City Commission, be able to become better informed as to the complexity of GRU’s operations, and provide an avenue
for citizen input into the decision process, while allowing the City Commission to retain its full rights as the governing body of GRU.”
Read that last sentence again.
The city commission did just that and created an appointed board: the Utility Advisory Board. Over the few years it existed many recommendations were made to GRU’s General Manager (yup, Bielarski) but he chose to ignore much of what they were tasked to advise him on.
Its no stretch to conclude that this lead to his firing in 2022.
A robust 73% of voters in 2024 made it crystal clear that they want to abolish the DeSantis appointed Authority and return GRU to local control. They will have another chance to vote on that again in the November 4th Special Election.
Glad you mentioned that Utility Advisary Board Ms. B. What you failed to mention however was the outlandish proposals that group thought up. For example, Wendell Porter brought forth a goal of converting all 34,000 gas customers to electric (without considering that a large portion of GRU’s gas customers aren’t in GRU’s territories, oops); having GRU pay to convert the customers’ a gas appliances to electric (at an estimated $164 million); only use renewable energy to replace fossil fuel generated power (despite governmental regulations requiring reliable power which never has included solar or wind) creating a scenario where the utility would be in criminal violation of the law. Yeah Ms B. damn right I didn’t go along with the Utility Advisary Board recommendations. They were ill-informed, under-educated and crazy ideas that would have put GRU in a worse position.
74% of uneducated, uninformed, clueless voters want to cede power, and thereby the ability to take GRU profits and spend for their personal agendas, back to the Commission of Clowns.
Doesn’t sound like a highly educated community, but maybe they are. They just lack common sense.
The city voters and commission are not clueless. They are simply working to give themselves the power to tax the 40% of GRU customers outside the city to the maximum extent possible.
Steve, they own GRU – you and i don’t. Like any business they try to make a profit off their investment – they built it and own it – by charging their custumers like you and I more than it costs them. That is not a tax it’s a profit. I don’t know if you are a Republican, but most complaining here seem to be and apparently don’t have a clue what capitalism is.
Jazz, it is not a profit when the city takes more from GRU that it earned to begin with. THAT happened under both Poe and Ward. It is also taxing 40% of GRU customers who have no say in the matter. The local DEMOCRAT party is certainly NOT being democratic.
The amount the city takes from GRU varies by year and of course the city has an interest in not running their property into the ground by draining it. If they do, they’ll ultimately pay for it or lose it.
Utility customers don’t usually have a say in their rates, or at least I never have. If FPL makes a profit off it’s cusomers do you call that tax?
Any claim the city rate payers have to making an investment in GRU was pissed away by Hanrahan and company. Their forefathers built it, they destroyed it and they own it.
But if we give you a mulligan that the current city rate payers can claim that they have made an ‘investment’ in GRU, then the county rate payers have a much stronger claim that they have been either robbed or taxed (take your pick) to fund the city’s progressive financial sink holes.
Frankly, I don’t see why Democrats aren’t mad as hell about the way their hand picked city commission has run GRU into the ground. By chasing some green fantasy and mortgaging GRU’s future to Wall Street, Hanrahan and company ensured that the city wouldn’t have the money to fund the endless stream of progressive programs for two generations.
Why do you morons listen to CEOs? Legitimate question.
Who owned GREC and were any *local* investors benefiting from the payments?
Bielarski in fact accounted for the 95% financed $750 million purchase price for the biomass plant as being worth what was paid. That caused Ernst and Young and the GRU CFO to resign. Ed became an award-winning darling of Bond Buyers.
As a result, the Biomass Electric Plant is depreciating much faster than the related debt is being amortized. Thus, we will not have paid for the Biomass Plant as of the date of forecasted retirement (2043).
Even worse, Ed in fact paid a huge PENALTY of between $300-$400 million to EXIT THE BIOMASS PPA.
This PENALTY is improperly booked by GRU as an asset, when in fact it is an operating loss for 2019. The truth is that GRU’s claimed “net position”, which has stagnated SINCE 2005 at about $400 million, may in fact be near ZERO! Note: Pegeen Hanrahan: City Commissioner (1996-2002); Mayor (2004-2010).
Moreover, Sec. 55.11 Fla. Stat. prohibits enforcement of Judicial Judgments through levies against municipal assets. Thus, as with the recent $120 million judgment against GRU in an auto accident case, settled for $11 million (10 cents on the dollar), a claims bill would have to be filed with the legislature AFTER any Biomass PPA judgment became final – which could be many years. GRU could have bought the plant for much less money.
Ed Bielarski sold us into economic slavery by conceding the legality of an unprecedented, unjust enrichment of an out-of-town energy promoter.
Slavery is something Gainesville residents are used to.
Jim, stop telling these whoppers. Ernest and Young weren’t the auditors the year we bought out the biomass deal. The former CFO had already resigned before I got there. I don’t even have time to go into your other falsehoods. Get a grip man.
If the state or county or county residents like me want to own GRU, they/we need to buy it from the city. Belarski is advocating theft, pure and simple.
Okay Jazzman. I’ll give you credit for being consistent, no matter how wrong. The city still owns GRU, it is governed by an independent board. The state has the right under the State Constitution to change governing structure. That’s the legal argument. So, as though you are the righteous judge here, you call me on the carpet for advocating theft when in effect I am advocating for the rule of law – laws you don’t understand pure and simple.
Ed, if I take over your house but let you stay in the guest room while giving you an allowance, do you still “own” it?
I understand the state has the right to “change governing structure”, but that is historically reserved for situations of natural calamities and/or criminal malfeasance, not partisan BS to take over local government entities with A credit ratings.
Given our governor’s history of removing elected officials because he didn’t like their party and policies, though they had violated no laws and had sterling records, his interference in private businesses, and the legislature’s increasing practice of removing the control local governments have over their cities and counties, your position of approving and enacting autocratic edicts fits right in with the statist designs of your handlers.
As you know, the state could have enacted oversight with guidelines, and importantly end goals with an end date for this oversight, instead of the hostile and partisan takeover with no defined end, of which you are the oberfuhrer.
Did you run for the city commission with a platform of giving GRU to the state?
I’m glad you made the analogy about taking over my house. That’s exactly what a lender would do if I didn’t make my mortgage payments. As I detailed in my book, the city commission didn’t learn a thing about finances from the biomass fiasco. They were continuing to go down a fiscally unhealthy path. If unable to pay the massive debt, GRU’s debt would fall upon the state. They stepped in. Simple.
Ed, neither GRU or the City of Gainesville defaulted on a debt and “As of February 2023, Gainesville Regional Utilities’ (GRU) revenue bonds had a credit rating of Aa3 with a stable outlook from Moody’s Investors Service. In June 2022, Fitch Ratings also affirmed GRU’s utility system revenue bonds at an ‘A+’ rating with a stable outlook.” The state take over bill pased in 2023 and the “authority” took over in Oct 2023.
https://www.gru.com/Portals/0/2023%20Updates/Moodys-affirms-GRUs-FL-Aa3-09Feb2023-PR_908011739.pdf
https://www.fitchratings.com/research/us-public-finance/fitch-affirms-gainesville-regional-utilities-fl-revs-at-a-outlook-stable-23-06-2022#:~:text=Following%20the%20conversion%20of%20Deerhaven,(DHR)%2C%20and%20coal.&text=The%20Deerhaven%202%20conversion%20to,expected%20addition%20of%20solar%20capacity.
You didn’t reply to the fact that a state take over was not the only, or most prudent, response to the claimed problem – the real problem was a partisan power grab run by 2 traitor GOP state legislator’s – or to whether you ran for city commission on a platform of ceding GRU to the state. How do we know you aren’t just punishing city voters for overwhelmingly rejecting you in that election?
The govt can take away a home under certain circumstances including illegal use and via court bankruptcy seizure cases.
Neither of those 2 circumstances apply to GRU or the city before it’s takeover by the state GOP.
Ed. Thank you for failing to address my central premise that you consigned us to an eventual bailout.
“The city”doesn’t own anything. WE THE PEOPLE own it and pay for everything “the city” lords over with it’s misguided political agendas. The City Commission is supposed to be for the majority of Gainesville residents and the well being of all the citizens that reside in Gainesville or are forced to pay the city when they don’t have any say at all in regards to GRU. We the people want a responsible and honest commission. I hope more people get out of the house and get involved. Things really need to change or we can forget about “home rule”. In the meantime I thank the Governor for his involvement, unfortunately, it was/is necessary.
So James, you win or call in the Governor? Sounds like fascism to me, and I don’t use the word often.
The Hanrahan/Bielarski GRU 102 MW Biomass Electric Generating Plant circa 2013 was:
1. Built by private “partners” (of our local elected officials) for about $350 million
2. Subsidized by Federal Tarp Money, along with large, indirect local subsidies (SLA Losses)
3. Was unnecessary
4. Was determined to be uneconomic long before the disastrous Biomass Power Purchase Agreement (PPA) was signed
5. Was made worse through a series of unfavorable amendments to the PPA WITHOUT CONSIDERATION
6. Was the wrong fit for our array of existing aging electric plants (base load vs. peaking units)
7. Was built on GRU Land
8. Was wholly dependent on GRU transmission lines
9. Was legally challenged in five (5) Citizen-initiated lawsuits by our best and brightest citizens
10. Remains dirty and uneconomic
11. Was purchased for $750 million in 2019 after the passage of six (6) of the 30 years useful life of the plant. In the same year, a larger plant (110mw) built by the same promoters in Austin, Texas sold for $460 million – and was mothballed by a utility many times larger than GRU. The GRU transaction followed over $400 million of payments under the PPA for electricity at four (4) times the market rate, whether needed or not.
12. Was required to run at an output deleterious to the well-being of GRU’s companion base load units.
Ed claims he “saved” us $1 billion (ignoring present value) by this disastrous buyout. What Ed does not mention is that:
1. Ed’s deal doubled GRU debt. GRU HAD to operate the Biomass plant – it was too small to mothball the plant.
2. He entered into a sham mediation about the Biomass PPA, and then abandoned it.
3. He bought into the notion that concerned citizens were a “peanut gallery”.
4. He ridiculed the notion of any reform of GRU Governance.
5. Ignored the advice of the Akerman Law Firm regarding amendments to the PPA that were legally assailable.
6. Was focused on pleasing his lords and masters by buying out the PPA – without regard to cost – and squelching any meaningful inquiry, thus temporarily keeping his job.
How dare you make a list of 18 points under the moniker Hanrahan/Bielarski GRU 102 MW Biomass Plant for which 1 thru 10 and 12, prior to 2015, I was sitting in my office in eastern Pennsylvania managing a power plant. Jim, are you in some time and space continuum in which you can’t understand when people enter and leave Gainesville? Pease, I beg of you to focus on the real problem here. It’s not me. It’s the City Commission. BTW, I don’t want to waste my time, but I’ll tell the folks what the reality is behind points 11 and 13 thru 18 in another post. Sheeez…
Jim Nobody and I mean nobody left, right, or otherwise thinks much of what you have to say. They know you’re a troll.
Re: “The Hanrahan/Bielarski GRU 102 MW Biomass Electric Generating Plant circa 2013 was:”
Do you always explicitly lie or mislead when you post? I will go with lie, because you are well aware when Bielarski was hired by GRU. Hint, it wasn’t in 2013. Another hint, if you actually want to obtain a shred of credibility, just tell the truth. Many folks actually stop reading after the initial lie.