GRU proposes a 30-year contract with Florida Power & Light

BY JENNIFER CABRERA

Editor’s note: GRU has announced that it will not be pursuing this plan at this time. The Gainesville Sun article says that the January 28 meeting is canceled, but the city’s meeting calendar does not reflect this change yet.

GRU’s General Manager Ed Bielarski is proposing that GRU enter into a 30-year contract with Florida Power & Light (FP&L) to build transmission lines that can be used to purchase power in the future.

Bielarski gave a presentation to the Utility Advisory Board on January 9, and the same topic is on the agenda for the January 16 Gainesville City Commission meeting. Bielarski said that the utility is currently at a disadvantage relative to lower-cost producers like FP&L: five of GRU’s plants are over 38 years old, all of the plants are costly to operate, and the commission’s stated goal of reaching 100% renewable power by 2045 limits the utility’s choices in replacing those plants. FP&L’s average cost per MW is $20-$30, while GRU’s is $35-$45. 

Bielarski outlined four options:

1. Maintain the status quo and experience increased outages and costs.
2. Proactively replace the plants, which would cost up to $2 billion and require another biomass plant, since, according to Bielarski, “the technology at this point doesn’t envision any other way to get to 100% renewable without the introduction of another biomass plant.”
3. Exit the generation business, which would require upgrading GRU’s tie lines and incurring decommissioning costs and job losses.
4. The “hybrid solution”: FP&L will upgrade the transmission lines to 450MW capacity, enabling GRU to decide, over time, whether to generate power locally or buy it from other producers.

The presentation was mainly about the fourth option. Bielarski recommended that the Utility Advisory Board approve a plan in which GRU would enter into a 30-year contract with FP&L. FP&L would incur the costs of building the transmission lines, and in return GRU will pay FP&L a sum that will start around $9 million per year. Bielarski says that their models predict an annual savings of $10-$14 million dollars in fuel costs (by purchasing power at a rate lower than it costs to produce locally) and $5-$8 million in labor costs as plants are shut down. Although the plan seems to position GRU to primarily purchase its power, the projected costs don’t include decommissioning costs, and the $9 million paid to FP&L does not purchase any power—it just provides the transmission lines. Bielarski predicts a net savings of $8-$15 million per year, which can be used to pay down GRU’s debt or for other purposes (the recommendation was to designate the funds to pay down the debt, but the Utility Advisory Board changed that to “direct GRU to bring recommendations to the UAB and the city commission for how to use the savings from the result of the network agreement”).

The plan was presented as requiring urgent approval because FP&L recently purchased Gulf Power, and they will need transmission lines from their current territory to the panhandle. These lines can run through Alachua County and connect GRU to FP&L’s territory if GRU steps up before another utility does. An earlier study predicted that it would cost $200-$400 million for GRU to build the transmission lines itself.

During the meeting, Bielarski criticized FP&L for not being as aggressive on renewables as GRU has been: “Look, they are slackers when it comes to getting 100% renewable. I will say it right here. Across your fleet, 3%, forget it. Get out of here.” One member of the Utility Advisory Board asked whether they could pressure FP&L to “[commit] right now to getting 50% green” (the answer from FP&L’s representative was “I’d feel uncomfortable doing that at this very moment.”). So it was unclear how entering into a Power Purchase Agreement to replace the power that is currently locally-generated would get Gainesville to 100% renewable energy (the goal is specifically “providing 100 percent of the city’s energy from renewable resources by 2045”).

Part of the explanation for how the agreement would help GRU increase its use of renewable energy lies in the Balancing Authority regulations from the Federal Energy Regulatory Commission (FERC). The regulations require a utility to be able to bring power on line within 30 minutes to replace the loss of its largest generating unit. Given the size and mix of GRU’s generating plants, any large addition of solar power makes it difficult to meet those regulations. Bielarski said that if FP&L becomes the Balancing Authority, their much larger generating capacity would allow GRU to use more solar energy. 

Bielarski sent a letter to GRU employees on January 9, stating, “We do not anticipate that the agreement will impact employees within the next several years. Instead we will utilize the next few years to establish the exact timetable for retiring and transitioning assets, along with how we staff these plants. As we work through that process, I will continue to communicate future plans while balancing the interests of the city, our customers and employees.” The letter included the chart below:

The City Commission will consider the plan during the afternoon session of its regular meeting on Thursday.