AUSTIN (KXAN) — City Council agreed Thursday to hire outside attorneys to review risk in a $2.3 billion power contract that one council member has called a “disaster.”
The contract is between Austin and an East Texas wood-waste plant, Nacogdoches Power LLC, for 100 megawatts of power. At a cost of up to $325,000, Jackson Walker LLP will help in “reducing the City’s financial exposure to the biomass plant,” according to council documents.
The problem with the 20-year contract, said Councilman Don Zimmerman, is that “we are obligated to pay an exorbitant capacity fee” regardless of whether we receive power.
Austin is paying “over $50 million a year, even if it produces no power,” Zimmerman said. What’s more, that payment increases each year and could near $80 million by the end of the contract term, he added.
The plant burns wood waste and scraps and began sending power to Austin in 2012. But the power agreement has not rolled out smoothly in the ensuing years, due in large part to energy economics, according to city documents and Zimmerman.
As a result of bargain natural gas prices, the plant has not been able to deliver on a consistent basis. Nevertheless, Austin continues to make payments to the power plant company as a part its contract.
“We’ve been overcharged for this project,” said Councilman Don Zimmerman.
In 2008, Austin Energy recommended the biomass purchase agreement, billing it as “competitively priced, carbon neutral, renewable energy.”
“There is no unanticipated fiscal impact,” Austin Energy noted in its 2008 recommendation.
In addition to intermittent power, environmentalists have raised concerns that biomass energy may release more greenhouse gas than other fossil fuels.
“I was surprised to see how much opposition the environmental community brought back in 2008,” Zimmerman said.
During the council meeting, Zimmerman attempted to reduce the maximum fee for the outside attorneys to $150,000 from $325,000. His amendment did not pass.
KXAN has reached out to city attorneys and the mayor’s office, we will update this story as more information becomes available.