A timeline of mounting debt, the biomass plant and a power struggle
With Gov. Ron DeSantis’ signing of a bill last month appointing an independent board to oversee Gainesville Regional Utilities, customers may be wondering about the future of the city’s utility company.
If the headlines about GRU from the last few months have left you scratching your head wondering how we got here, here’s a breakdown of Gainesville’s recent history with GRU, starting in 2009 with a plan for renewable energy.
Beginning with biomass
GRU’s current controversies can be traced to May 2009, when city commissioners decided to build a biomass plant, the Gainesville Renewable Energy Center (GREC). This plant would burn industrial wood and yard waste from across north central Florida and turn it into energy. Proponents argued it would help Gainesville move away from reliance on fossil fuels and would save customers money on energy in the long run, while critics worried about air pollution and potentially increased rates.
The city entered a 30-year contract with Massachusetts-based company American Renewables, which then built and initially ran the $500 million plant. Construction started in 2011, and the plant began operating in 2013.
What went wrong?
Trouble arose in the first few years of the city’s contract with American Renewables, when new city commissioners became disenchanted with the numbers — finding that the contract was going to cost Gainesville $75 million annually just for the right to purchase energy from GREC. Over 30 years, that amounted to $2.1 billion. A 2018 report from a think tank critical of biomass as an energy source listed Gainesville’s contract as one of the worst in the country.
After debating the move for nearly a year, commissioners ended up buying out the contract with the biomass plant operator in 2017 for over $750 million, the single-largest asset purchase in the city’s history.
The initial construction of the plant had doubled the utility’s debt load in 2014, but commission documents from 2017 indicate that the city ended up saving money from the buyout. Still, with interest, the buyout will cost $1.2 billion over 30 years.
Those numbers — along with the utility’s increased annual debt payments — led to higher customer bills. With them came internal and external political pressure for commissioners and utility management to find ways to pay off the utility’s debt.
So why exactly does it matter if GRU is in debt?
In January 2022, a state audit found that GRU was carrying nearly $2 billion in debt. Back in 2009, when the commissioners first moved toward building a biomass plant, the utility’s debt was a little over $900 million. In February 2023, Moody’s Investors Service downgraded the city’s credit rating, raising alarm among residents.
Part of the reason GRU’s continuing financial troubles are of concern to the city is because of an agreement called the General Fund Transfer. The city was using some of the utility’s revenue to fund a portion of its budget — everything from police to parks. When the growing debt pressure meant GRU would have less money to transfer, Gainesville city commissioners opted some years to raise utility rates instead of trimming large parts of city services.
GRU bills since the year of the buyout have been some of the highest in the state. Since January 2017, when the Florida Municipal Electric Association started posting this data to its website, GRU’s monthly electric bills have ranked in the top five most expensive among Florida’s over two dozen public utilities.
GRU ranked as the number one most expensive for 22 out of 75 months. As of May, it was third.
This has led to increased scrutiny from the state legislature. City commission meetings from earlier this year detail the city’s scramble to deal with its finances, including multiple decreases to the fund transfer and discussions about how to find new sources of funding.
The state takes over
By now, many have heard of the state’s takeover of GRU. In April, Rep. Chuck Clemons, R-Newberry, filed a bill to hand over authority of the utility company from the city commission to a state-appointed board. The bill passed the legislature, and DeSantis last month signed it into law.
Notably, in 2018, a similar push to take control of the utility away from the city’s elected leaders was put on the ballot for Gainesville voters. The measure, which Clemons also sponsored, would have given power to a city-appointed independent board. It failed by a margin of 60 to 40 percent of voters.
Where does that leave us?
The utility’s position is now in transition, as the governor will appoint the new board members. Their term will begin Oct. 1, with the start of the city’s new fiscal year. At a general policy committee meeting on Thursday, city commissioners went over steps to transition utility authority over to the board, including the dozens of relationships between GRU and city government for things like payroll, HR and IT services.
Meanwhile, legal battles might stop or slow the state takeover.
A local nonprofit in early July filed a lawsuit, saying it would infringe upon constitutional rights to free speech and petition.
The city of Gainesville followed three weeks later with its own lawsuit against the state takeover, stating the law is “unconstitutionally vague.” The city filed for a temporary injunction, or to pause the law while litigation proceeds, and declaratory relief, meaning it wants the law to be thrown out completely. City Attorney Daniel Nee said during Thursday’s policy meeting, “We found numerous inconsistencies with constitutional and general law provisions that we will have a great deal of difficulty putting into effect.” The city will seek an expedited hearing to try to head off the Oct. 1 transition date, Nee said.
At the meeting, Commissioner Bryan Eastman discussed the city’s education campaign to keep Gainesville residents informed about the transition.
“For over a hundred years, Gainesville Regional Utilities customers have had the ability to speak directly to the people that make changes within their utility. And they can still do that. But there’s no direct accountability. That all goes through the governor at this point,” Eastman said.
GRU’s general manager, Tony Cunningham, emphasized that customers shouldn’t feel concerned about the transition.
“From a customer standpoint, nothing is really going to change as we transition into a new board. They’re still going to pay the bills the same way. You’re still going to receive service the same way,” he said.