Austin Energy: Safeguards in place after paying $460M for plant that lost value over the years

Investigations

AUSTIN (KXAN) — The city of Austin now owns the Nacogdoches wood-burning plant it previously used as a lease. 

Environmental activist Paul Robbins says the purchase is the end of a $2.3 billion long-term mistake.

“I compared benchmark costs to what a biomass plant should have cost compared to what we were being charged,” he said. “The cost difference was stark, it made no sense.”

Last week, KXAN reported that the city paid $460 million to buy the plant outright.

Austin energy leaders say getting out of the agreement will save customers some $275 million over what would be a 20-year lease.

Now, the city owns a plant that’s lost value over the years. Due to bargain natural gas prices, the plant has not been able to deliver on a consistent basis. 

“It’s there for the opportunities when it can bring savings or protection to our customers,” said Erika Bierschbach with Austin Energy. 

When asked how frequently savings occurred Bierschbach said, “it depends on the year.”

Austin Energy leaders say they’re scrutinizing projects more thoroughly now and have a more sophisticated bidding process when asked how prepared they are to enter into long-term energy deals, compared with before the previous agreement with the Nacogdoches plant.

The utility also said in a written question-and-answer document:

We’ve invested in tools and technology – and made similar investments in our people – to give us the internal analyses and modeling capabilities to more fully understand the potential impact of a project on our portfolio. These analyses now account for more variables, as far more market data is available today. And much like having a diverse investment portfolio, we spread risk across our energy supply portfolio by fuel type, size, location, and date acquired.

Robbins hopes the city won’t react so quickly to the current energy market when exploring these long-term projects.

“Do not be scared and crowded by current events,” he said. “Do not make decisions in fear.”

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