"GRU is at a Crossroads"; Gainesville Sun "Gets It"

By The Gainesville Sun editorial board (Sunday, February 17, 2019)


Ed Bielarski makes the case that Gainesville Regional Utilities is “at a crossroads” in a white paper issued earlier this month.
The GRU general manager is partially right — only it’s the city of Gainesville as a whole that is at a crossroads. With the city-owned utility experiencing rising costs and debt at a time when its reserves and revenues have declined, hard decisions have to be made to shore up GRU’s finances that affect the overall city budget.

The City Commission this year will be faced with several unpleasant options. They include cutting GRU’s budget and restructuring its debt, lowering the transfer of utility revenues to the general government budget, cutting municipal programs and services, raising property taxes or some combination of these options.

Higher utility rates are likely coming as well. A recent study of GRU’s finances by the firm Public Financial Management projected annual electric rate hikes over five years, further increasing rates that are already among the state’s highest.
Some current and former city officials say the focus should be less on rates than on household energy consumption, a measure in which GRU ranks better than many utilities. But Bielarski argues that the success of energy conservation and solar energy programs have harmed GRU’s bottom line by significantly decreasing local electricity use.

There are social benefits provided by encouraging the use of renewable energy and helping lower-income residents make home improvements that decrease their utility bills. But GRU’s financial challenges should force city commissioners to better account for the cost of these benefits.

These problems are hard to swallow so soon after the community was sold on the need to spend $750 million to purchase the biomass power plant from its private owners, in order to escape from a costly contract to buy power from it. The purchase did produce initial savings for customers, but these savings are quickly being erased by rising rates.
Bielarski traces GRU’s financial troubles further back than the biomass plant. In addition to a push for conservation that started in 2006 and a solar feed-in tariff started in 2009, which pays system owners a set price over 20 years for the energy they produce, he cites a huge jump in debt.

GRU’s debt doubled between fiscal years 2000 and 2013, according to the white paper. The utility invested in several major projects over that time including installing air-pollution controls at its coal-fired power plant and building its Eastside Operations Center.

GRU’s sizable debt, along with the consequences of a 2012 debt refinancing, must be kept in mind as a restructuring of debt is now considered. Bielarski argues for that option in combination with others, including freezing or reducing the transfer.

City commissioners have to think about GRU’s fiscal health as well as the well-being of the city as a whole in developing a budget in the coming months. Some shared sacrifice is needed, including lowering the city’s reliance on the transfer.
Whatever commissioners do, they must not kick problems down the road — and put the city and GRU at another crossroads in a few years.