Gainesville residents and businesses can expect increased energy costs starting Wednesday despite Gainesville Regional Utilities lowering its base rates and cutting fixed costs.
The company’s managing utility analyst, Diane Wilson, said residential electricity rates will increase $1.35 per 1,000 kilowatt-hours, down from the $9.85 initially projected. Residents could see a total increase of about $6 per month due to a rise in water, natural gas and wastewater rates.
Costs related to the Gainesville Renewable Energy Center, which began operations out of GRU’s Deerhaven property in December 2013, are partially responsible for the increased rates to residents.
Gainesville entered into a 30-year, $3.1-billion power-purchase agreement in 2009, nearly three years before construction, with the biomass plant. Opponents of the exclusive agreement say it allows the plant to charge higher-than-market energy rates. When the city attempted to buy the plant in 2013, its offer was rejected.
“When we added the biomass plant, the fuel-related expenses portion went up significantly, and so what we’ve done to offset that is we’ve been very focused on cost-cutting to all of our other expenses to help offset the total bill,” Wilson said.
Wilson said GRU was able to curb its fixed costs through a number of measures including leaving 59 positions unfilled within the company for the next year, forgoing a 2 percent employee raise and reaching an agreement with the Gainesville City Commission to cut its contributions to Gainesville’s General Fund by $1.8 million yearly. According to GRU’s website, the fund supports local parks, transportation services, police and fire rescue forces.
City finance director Mark Benton said the fund contributions are a substitute for GRU paying property taxes, franchise fees and shareholder returns. In 2015, GRU will give about $35 million to the fund, with an increase of 1.5 percent each year through 2018.
Benton said the $1.8-million decrease “is a significant amount of revenue to make up in one year,” but the city balanced the budget by reducing a bond issue, eliminating a number of vacant positions and tapping into the city’s reserves.
Nathan Skop, an attorney and former commissioner on the Florida Public Service Commission, is a vocal opponent of the contract between GRU and the biomass plant.
In March 2013, The Gainesville Sun reported GRU had collected about $23 million from customers’ charges to create a “levelization” fund that would help keep future rates lower when the biomass plant went into operation.
Skop said this fund is artificially lowering the fuel-adjustment charge to conceal the true cost of the biomass plant to GRU customers. He said the levelization fund is scheduled to run out in 2014, so in the next few years GRU will have to decide whether to increase its debt or to pass on higher rates to consumers.
Wilson said GRU is aware its electricity rates are among the highest in Florida, but its management team is committed to changing that.
“That’s one of our number one priorities,” Wilson said. “We would like to be in the middle, so right now we are trying to develop plans on how to get there.”