EUC members concerned about gas plant study

While the future makeup of the city’s energy portfolio potentially rests on an upcoming independent review of a proposed natural gas plant, members of the Electric Utility Commission continue to vocalize their concerns about the study.

Vice Chair Karen Hadden and Commissioner Joep Meijer sent a letter Thursday to Austin Energy staff scrutinizing potential underlying assumptions and requesting that the study be fair and comprehensive in its cost, benefit and risk analysis of the natural gas plant and renewable alternatives such as wind and solar.

Among other comments, Hadden and Meijer said the study should consider the lowest-cost options in renewable alternatives and that the final report should include a “year-by-year summary of costs and revenues anticipated alongside environmental impact, including water use, water contamination and air and water pollution impacts.”

They wrote that “assumptions regarding future gas prices are uncertain” and asserted that substituting the Decker steam units with a hypothetical 500-megawatt gas plant in Austin Energy’s six-year backcast would “almost certainly show that a new gas combined cycle plant would have made money in 2011, but lost money in 2009, 2010, 2012, 2013 and 2014.”

Austin Energy must sell the power it generates to the Electric Reliability Council of Texas, the wholesale energy market for most of the state, and purchase it back at competitive prices.

Hadden and Meijer also expressed affordability concerns. “A new gas plant will have many certain hard costs, which may range into billions of dollars over its lifetime for fuel and for building, operating and maintaining the plant, but may have uncertain revenues,” they wrote.

“It appears that at least $500 million would be needed for a gas plant before it starts generating any revenue. While much of this cost might be financed, and be spread out over time, there will likely be $100 + million in ‘current year funds’ for capital spending that will cause Austin Energy to exceed the affordability goal, at least for a time.”

City Council set affordability goals in 2011 that require Austin Energy to keep its rates in the lower 50 percent of comparable utilities in the state and not raise average bills by more than 2 percent in a given fiscal year.

Austin Energy spokesman Carlos Cordova told the Austin Monitor on Monday that the utility received the letter and has not yet posted online the request for proposal document, which will publicly solicit applications from potential consultants.

“We are in the process of considering and incorporating their comments into the final document,” Cordova said. “We hope to have this complete and over to City of Austin Purchasing next week. Our hope is we can expedite the process and have a contract back to the City Council in late February for approval.”

Cordova clarified this statement Tuesday. “We are only considering language that is consistent with the direction that we were given by the Austin City Council,” he said. “The Council considered and rejected amendments (to the generation plan) on the dais. While the Council requested that Austin Energy work with EUC members on the (request for proposal), we are not considering language that the Council already rejected or is not consistent with what they adopted.”

The independent review of a 500-megawatt combined-cycle natural gas plant that Austin Energy proposed is part of the Austin Energy Resource, Generation and Climate Protection Plan to 2025 that Council approved on Dec. 11. The plan also includes a 55 percent renewable energy goal and aims to reduce demand, replace the Decker steam units and create a fund to begin retiring the city’s shares of the Fayette coal plant in 2022.

In adopting the plan, Council requested that Austin Energy consult the EUC about the scope of the review, which it did at an EUC meeting on Dec. 15.

Rather than submit comments, the EUC requested more time and formed a “Gap Study Subcommittee” consisting of Hadden, Meijer and Commissioner Brent Heidebrecht to submit comments instead, though only Hadden and Meijer signed the letter to Austin Energy. The two commissioners also sent lists of consultants to Austin Energy that they believe would be well suited to conduct the study.

Hadden and Meijer both followed up with the Monitor on Tuesday.

Meijer referred to last week’s letter as the “start of the conversation” about the study between the EUC and Austin Energy and added that there will be “more comments coming in the next couple of months.”

“The intent is twofold,” Meijer explained. “One is to ask Austin Energy to clarify their position on some of these topics … and the second is to inform the consultant that is going to be hired to do the gap study so that they look at the assumptions from Austin Energy knowing that these are questions that are being raised by the EUC working group.”

Meijer said that the EUC plans to submit another set of comments on the study’s assumptions to Austin Energy and the consultant company, when it is hired. Basing his timeline on Austin Energy’s goal to hire a consultant by the end of February, Meijer said the EUC plans to submit the comments in early March.

Hadden explained why the Gap Study Subcommittee chose its name. “Austin Energy is looking at doing a study that they are calling a ‘gas plant study,’” she said. “We think it should be called a gap study, meaning the need for 500 megawatts of energy. They have a foregone conclusion that a gas plant is the best idea right now. I don’t believe that is true.”

Hadden raised concerns that the process of extracting natural gas — commonly known as fracking — can negatively impact the environment by releasing contaminants into the water supply near the extraction site and contribute to climate change by releasing methane into the atmosphere.

“In this day and age, when we’re dealing with climate change, if we can find a renewable energy solution and not build a gas plant, I think we would be much better off,” Hadden said. “We’re trying to get a study that leaves a more fair and honest look at options.”

Photo by Bidgee (Own work) [CC BY-SA 3.0], via Wikimedia Commons