In 2019, GRU would have to reduce revenue needed from rates by $24 million annually — or 19 percent of the total — to bring its rates to average among Florida utilities.
A decade has passed since the Gainesville City Commission began to consider using a biomass energy plant, and it’s been two years since the plant began operating.
GRU is trying to put the plant’s contentious history in the past, aiming to offset the biomass plant’s impact on customers and better inform the commission.
These changes are taking place as calls to create an independent governing board for GRU continue, based largely on the perception that the commission failed to adequately oversee GRU’s negotiations (headed by former General Manager Bob Hunzinger) with the plant’s Massachusetts-based owner, the Gainesville Renewable Energy Center.
GRU’s work to improve its operations is in line with recommendations from a Navigant Consulting audit of the negotiations with GREC.
As part of its progress, GRU has responded to the city commission’s goal of bringing GRU’s electric rates — currently among the highest in the state — down to the middle of the pack.
That’s a big hurdle, concluded a GRU study on rates requested by Kathy Viehe, who was appointed interim general manager in October 2013.
In 2019, GRU would have to reduce revenue needed from rates by $24 million annually — or 19 percent of the total — to bring its rates to average among Florida utilities, the study concluded.
“In the study, we asked: ‘What ideas can help us in our situation?’” Viehe said. “We found that there is no magic bullet.”
But, the study did come up with one potential new approach that might result in $6 million in annual savings and some other possibilities for additional savings.
The potential $6 million savings would come from joining the electric supply pool of the Florida Municipal Power Agency, a consortium of utilities from 31 cities.
Joining the pool would allow GRU to buy electricity at the lowest rate available among the pool’s members, Viehe said.
For GRU to join the pool, it would need to expand its transmissions lines considerably. The utility plans to have an estimate of the cost of this expansion within the next six months.
The rate-reduction study is Viehe’s swan song.
“I wanted to get this done before the new general manager arrived,” she said.
Viehe, who plans to retire in January, will overlap several months with Edward Bielarski Jr., who took over as general manager in late June.
Using Outside Expertise
In calling for an independent GRU governing board, the Gainesville Area Chamber of Commerce and State Rep. Keith Perry have advocated that the new board include members with experience in utilities.
Viehe already has reached out beyond GRU and city staff. She involved four people from the utility industry in Florida as well as city and GRU staff in a wide-ranging brainstorming session on cost cutting.
The outsiders were Jim Stanfield, the former general manager of Lakeland Electric; Fred Bryant and Jody Finklea, attorneys for the FMPA; and Fred Haddad, an Orlando-based consultant for the energy industry.
UF Contract Under Discussion
The GRU study did not touch on another option that could greatly benefit GRU financially: becoming the University of Florida’s power provider.
Duke Energy (formerly Progress Energy) has provided most of UF’s power since 1992 at a plant on the university’s campus that produces both electricity and steam.
UF’s contract with Duke is up for renewal, however, and the university is exploring several options, one of which could include buying additional electricity from another source, said Curtis Reynolds, the university’s vice president for business affairs.
With UF spending more than $40 million a year on energy, snagging part of the university’s contract would boost GRU’s revenue by up to 10 percent. UF already is a major GRU customer, primarily through a GRU plant that serves the UF Health Cancer Center. GRU is doubling the size of the plant, which provides electricity, heat and cooling, to serve two new hospitals that are under construction: the Heart & Vascular Hospital and the Neuromedicine Hospital.
Improving Communication with the Commission
GRU has made other changes that are in line with Navigant’s recommendations.
One change is devoting one afternoon commission meeting every month solely to GRU so that the commission can focus only on utility matters without the distraction of other business.
Second, GRU is providing more information about how the utility operates as well as improvements that it is considering to commissioners both in the monthly meetings and in one-on-one conversations with individual commissioners.
“We are talking with them about what we’re doing and what we’re working on,” Viehe said.