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The Sky 97.3>Audio & Video on Demand>>GRU's GM Ed Bielarski talks GREC buyout & more

GRU's GM Ed Bielarski talks GREC buyout & more

Mar 21, 2017|

Bob Rose - March 21 - 8AM

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Automatically Generated Transcript (may not be 100% accurate)

This is news talk 97.3 in the us now. Some tough road show live and local your time Jack is brought to you by. Prestige Kay's jewel is what the answer is always just very special guests in a studio first time Ed bill are ski as a general manager. Of G are you there the utility company that serves. Gainsville and much of the surrounding area as well and Ed welcome to the show will thank you so much is this seat war are your ears burning. No I'm I'm actually a pretty good day in the neighborhood about. Well it's fantastic look welcome on board because. You know Jerry Lewis had their issues and I first went to tell everybody. In my opinion and I was Jerry customer for a long time. The service that I got from Jerry was fantastic people who work there interacting with them has always been a joint. It's always been about rates. And I always try to remind people that. GRU who takes their marching orders from the city commissioners in the city of Gainesville so if you live in the city of Gainesville and you don't show up to vote. They're 12% show up. Don't cry about the issues. That impact every day that I beg people to participate and I think people not to. You know to make sure that they're folks didn't. Promote the biomass plant and vote for it and it got pushed through of course so you. I joined the club had you get hired on you know it's like a look at this beautiful house Gainesville GA are human is oblique. Ron power company man it's so good got water and everything and then wow there's like a huge crack in the foundation not literally but. The biomass plant over your first thoughts. Well I I certainly understood the situation with the of the biomass facilities and it wasn't so much the technology you're that or the plan itself. It was a function in the contract. The contract imposed additional costs. On on the customers. On that. Quite honestly we were talking before we came on air I mean almost one quarter. Of our electric rate is due to that violence Contra. A substantial 25%. Now before they even have the biomass plant. Jerry intended to have rates that were part of an average middle of the pack was a really middle of the pack for and and when you say that. Because people like to work with the numbers and push from around. Do we still operate under a tiered system it Gerri you yeah last week we have a two tiered system. It's just too I think at one time corrective and I was three I think it was okay. So how does that work. With a two tiered system. Well the tiered system is the lower rates are built in conservation rates so either they're lower. The higher tiers or higher for the larger consumers. Well but you say conservation. So if I've got five people in my family. And we're consuming X amount of power. And then there is so let's just say he one person living head down the street. NA can't you know in a smaller house. But their bill is not you know another words their consumption I'm actually being more. Conservative minded when you look at an hour per capita basis. As far as electricity used by persons in the home. So how can you really say it's under the guise of conservation. But that's kind of the euphemism we use. For the first year I came before you got to her right and not I I agree with you I mean one of the problems with having the tiered system is that. Everybody. Gets that first year. You know if you if you're using 15100 KW you're still getting that first year so it's not so much conservation for. You know people only up to that so it does have some it is problem. And it was an interesting dynamic too because in most cases in business the that the better customer you are the more you are spending more quantity your purchasing. You would actually receive a discount vs the smaller buyer user etc. And we do the inverse here and the other thing that's interesting is it's such an important part of the tax base of the city of Gainesville didn't. You would think the dead. They would actually want people to consume their product because. They use it for taxing purposes right. Yes we have we have a utility tax that so on top of the bill well I mean I remember when I changed out some much less efficient. Air conditioners and other appliances. In hopes of you know saving money on my power bill and Jerry you announced a race. Because he said people were so good. In the conserving a power we have to raise our rates to make up that shortfall I mean. How do you think you with a straight face addressed that today to the great pairing consumer. Well we are great content first let me say that Gainesville customers are great and servers. Of electricity. And it's not unusual for utilities to have that inverse. It's it's a matter of philosophy in watcher and it's hard to change it. So we're not unusual in the electric utility business you you can have higher users in some systems pay more and others you pay less. It's a it's a matter of the philosophy of the community and if they they want conservation. Only one they wanna limit resources that are used for electricity. I'm sorry how how we rank in terms of business. Users and there there race vs business in another part of the state. Or or commercial business rates are at a high instance they are I was on electricity. You or residential rates are the third. On. What it would amount of control would you have as a general manager to have an impact on those rates or is that sent by the city commission because I would consider that sort of an anti business. Move if you will because they have to consider expenses when when locating. An area like this sure. Well it is problematic for us and it is challenging. Because we are absorbing the cost of the biomass power purchase agreement. Our own and it does get skewed toward commercial rates. We bring budgets fourths through the commission every year they do set the rates for us. That's why this is so important to consider buying the biomass facility because that opportunity will allow us. To reduce that 75 million dollars that we're paying every year. And in and reduce it to a level where we could see a substantial rate reduction for both commercial and residential customers. Well I think it makes sense to purchase said if you can make financial sense of it so I guess meant next question is you think gray equity even salad and if they would. Would they sell it at a price that makes sense in other words we're gonna see immediate and long term savings. Oh absolutely. I mean I wouldn't be pursuing this habit spending the last month and a half talking with the officials at correct. We're probably in the last stages of a memorandum of understanding which is a non binding. Agreement but it is. Setting the framework for the development of a contract. This would we've actually had. Several meetings with the city commission as well as several with the utility advisory board just to discuss the elements of that. This is I gotta tell you about this is unprecedented. In terms of Gainesville and the disclosure what negotiations are the which had a PowerPoint that I can put up here and show everybody. A but I forgot this is radio. Does it benefit you. As somebody who is involved in ongoing negotiations is a benefit EU. To have transparency. On your side or is it actually. An impediment to getting that the deal done well. What would be nice is if transparency existed on the other side when you're negotiating yeah we get this we get the opportunity to show our hand we don't get to see the other site's hand. So to that extent I it is difficult it is challenging. But it's something that you just have to learn to adapt and and change with. Yeah I mean a thousand correct side you know I'd be measuring the political wind and well and and CG wander you know how high we could go on the price may still advise and I mean look Sarah. That's served that served a commercial company I mean their they have a fiduciary responsibility of their stakeholders to make as much profit as they can whether it's on the in house sale of these. They debt limit trying to do a deal where they would always that they would cellular bio mass but. The structure something they would still keep what was the what was that initial deal I read about. I think few years ago they looked at a possible prepayment. Of the obligations under the power purchase agreement they would Stallone. That didn't get. Off far off first base if you will. But if he won a little bit of inside baseball on that you're talking about what they watch you know we had a meeting the other day where we talked about of the ammo you have the chart we've had. Let's see MOU. Memorandum of understanding. We had all the negotiations lined up from what we wanted and what we've got. And during the meeting I had my CFO just a lot come up and talk to the commission and as we are talking a kind of put my arm around them and said you know this is my my guy. In discussions with Jim Gordon he said it was kind of touching to see that as he was watching at the C that the closeness between. You know Justin and myself so he's an indication he got a guy up in Boston going negotiating with who's watching the full level of these negotiate I'll expose. Stand out which is not a bad thing but like you said it's kind of unfair because they don't have to show anything. When we return after this break we're talking head bill are ski is the general manager of G are you talking about the possibility of buying the biomass plant on and ask him. Is there any way. We can use implant a switch it over and maybe burn another fuel argument opportunity to address that next. On the Bob Rochelle news talk 97.3 this guy. Like three. Tied to anyone on the Bob Rhodes show time Jack brought to you by prestige Hayes Jewelers. When he answers always yes and bill are Steve's a general manager of GRU and east about you know take it upon himself to agree to come in and talk about. In this it's very that controversial irritating for some and it is the possible purchase of the biomass plant. At how does this benefit the customers of GRU if indeed a purchase Coastr. I'm glad you asked Bob. I expect that in what's happening right now is under the power purchase agreement and and and look you know people here power purchase agreement what's. Really around releasing this power plant over thirty years we have 27 years left. We're gonna spend two point one billion now themselves. Two point one billion dollars over the next point seven years. If and and the reason for that is rack is spent half a billion dollars to build the facility. And are used getting an investor rate of return which is double digits. That drive that two point one billion dollars. When the so what we're doing is I think when you're advertiser says you know you want to own something suit. You don't pay somebody's mortgage we pay grips mortgage we also pay their equity investors. So we can buy it for 750 million dollars we can borrow at three and a half percent. And we can save 650. Million dollars. It will drive and eight to 10% reduction in customers' rates you mentioned business business as well as residential. So that's the driving force behind what we're looking. Now. Are you including 'cause I get confused on this when you talk about the savings. And let's just say you don't run a plan at all you're still gonna save all that money but if you run it. Does that cut into that savings because the rate because it cost more to run it then it would two to get the coal dear human right right. Well I think that's a great question I'm glad you answer that they asked that because there's so many people that don't understand that. My assumption for 650 million dollars of savings is maintaining it. In standby in other words haven't staffed. With 35 to forty employees ready to rock and roll. Whenever they're needed I haven't taken into account any economic dispatched. Its just. I'll give you the analogy it's like you have a chauffeured limousine it's sitting outside you're paying 194000. 709 dollars a day. There have that thing ready to go up that's what Greg's doing right now it would stay in that mode but be under our ownership. Right so we're not taking into account it running. At all to get that 650 million dollar savings in fact if it weren't there'd be a savings. Who's wooden staff. You could actually moth ball for a period of time while natural gas prices were so low. Could you switched at plant over. And American economic sense if you could but you switch it over to burn. Natural gas or something else because my understanding innocent before your time. When they were presenting possible biomass plants one of their companies came forward to Saturday you know the beauty of ours as you can switch you can burn nests or cola or natural gas or even trash I think it was. And that. Never many have thought that's the direction they go if they did and all but is this can we fix this plant. We can fix it but levee answer answer answer your question first. That it has a bubbling bed. Boiler technology. Which is very you know it's like a circulating flu did fluid dies bid boiler. They can burn all kinds of material right now what would you could do wood pellets you could do trash you can dual host of things. Natural gas isn't really one of whom it used as a start up fuel it gets the bed established. So they convert over to about. You know 1520 megawatts over to. Solid fuel as opposed to get us to guess isn't really that technology. Particularly at this moment but there are opportunities for other fuels but what we see is important is. The ability to get down below seven megawatts. Because right now when we run on we gotta go to seven megawatts and no less. Because that's the term of the contract. And it also. They haven't done some of the though the boiler tuning and some of the other ancillary work with duct work to allow it to get down that. That level and comply with pollution controls we believe for a modest sum of maybe fifteen million dollars we could converted to run to 25 megawatts. And then he would be adaptable on our fleet we could run it up and down we could do all kinds of things like peak. Our summertime middle of the day and hot. Because no brownouts known other because you've got to sign back up and you can turn on you've you've got to use you're part of that you understand it yes. We would probably some point use it for replacing low regulation at the granddaddy of our fleet. Unit one at deer haven which is build in the sixties so where that's gonna probably be retired in 2022. So this could replace it and avoid an additional cost of a 150 to 200 million dollars. As real savings. As far as how clean the coal being burned at deer haven is now. Are we above the standard Sino one time we were years ahead but I don't yes this was years ago so where are way. We. It at about the same time that the the biomass plant was built. We under took a lot of oath increased standards in the in the in the plant I think it somewhere in the order 125 million dollars spent. Out there for more scrub. I always wondered. The anti coal attitude. Come and then people care about planet earth. I thought well who would burn coal cleaner us or China. Or India because China built 300 coal fire plants what we closed down about the same amount. Yeah the standards for coal plants in the United States is is much higher of them elsewhere in the world. And as a result of that we do have a thing called clinical. So it from an interest rate perspective from an overall deal if things go through the way they stand now we hear negotiation would Greg. Consumers. Would save a lot of money and eight to 10% reduction across the board is what you're talking about absolutely. And how close do you think you art of making it a deal happen. We are at the moment. Looking weak we have the price. We have interest rate protections so that if interest rates go too high we can terminate the contract. We have an exclusivity period which means that we can negotiate only with Greg and Greg can only negotiate with a loss over a period of time. A we have this whole set of issues that have been. Vetted by the city attorney. So not the same city attorney and invented the original contract would crack. No we have we have a different city attorney general Eric and I'm Nicole Shelley very sharp young lady. And we also have Winston strong which is a nationally recognized law firm that's looking at this one I'm glad you brought up that I can make one more point here. One of the things that makes this different in the previous transaction we will have rating agencies. Rate this transaction. And we will have bondholders will door roadshow will go to New York probably Chicago San Francisco and bondholders will look at this and and you know you have the luxury of them vetting it as well. What would have probably a mock. Rating agency. Approval. And we actually had investors calling us now saying how can we invest in us which is. The gold standard. I just wanted to know at the end of the day. Who would be responsible for the contract. Because I still would like to know who was responsible for the previous contract. I mean I don't know how anybody could could look at that was good conscience and say this is a reasonable good contract I mean I would make my worst enemy signed something like that. While tell you one of the the issues that I've seen is the reduction of that contract and people weren't able to see it right now. Divorcing the full MOU I have something on the order of ten revisions. The memorandum of understanding. Are you concede. And in the public arena the conversations I've had with Jim Gordon and and when they own than the emails we've had back and forth. You can see what changed all along the way that will continue through this whole process. There's a timeline and it it's out there in the public. Ed bill are skewed general manager of GR you we appreciate it we know it's not an easy job and I get Ernie tell you're looking after the rate payers into an investor can and it's. Typical political climate here in in Gainesville sometimes enough and I just wanna say thanks in Cuba to go to work and reopen turns out well for everybody. Thank you very much I appreciate being here in tune of Bob Rose show it is at 930 were about fifteen minutes away from things that make you smile hi guys.