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Hillsborough County cuts out utility middleman to save money on energy

For years, Hillsborough County has burned trash to produce electricity. Tampa Electric bought that power and lit homes with it.

Then in 2009, the utility informed the county it was dramatically reducing its purchase price. It would pay the county half of what it would charge Hillsborough to power its government buildings.

So the county changed its business strategy. It cut out the middleman in the power supply chain by starting to hook up its buildings and plants off Falkenburg Road directly to its waste-to-energy plant in Brandon. Now it plans to expand that effort.

That simple maneuver is expected to save the county $1.5 million on its overall electric bill by 2015. Not bad for something sparked by an increasingly unfavorable business deal.

"It absolutely has been a huge win for us," said County Administrator Mike Merrill.

Hillsborough County christened the waste-to-energy plant nearly 25 years ago. It paid Covanta Hillsborough Inc. to build the plant. The company also operates the plant and has since expanded it.

It costs more to produce electricity by burning trash. But by doing so, the county sharply cuts how much garbage the county dumps.

"You're conserving landfill space," said John Lyons, incoming Public Utilities director for the county. "You're putting a different type of material into the landfill, like ash instead of something that decomposes and contributes to greenhouse gas. Plus, you're generating electricity with trash instead of fossil."

County commissioners decided years ago that this was a good trade-off.

Tampa Electric officials agreed to purchase whatever Covanta could produce in power. In the late 2000s, they offered a purchase price averaging about 8 cents for each kilowatt hour, according to Covanta officials.

The utility was charging the county 10 cents for each kilowatt hour that the government buildings used.

Then in 2009, the utility told the county it would start paying only about 5 cents for each kilowatt hour. Tampa Electric cites rules from the Public Service Commission. Those rules say investor-owned utilities must pay plants such as the county's only what it would cost them to produce the electricity themselves by the cheapest means possible.

"We don't have the ability to negotiate it higher or lower," said Cherie Jacobs, spokeswoman for Tampa Electric. "We don't charge based on a whim."

The idea is to ensure that ratepayers of public utilities aren't gouged because the power company gets its electricity from a costly source. But it also makes for a not-so-good deal for plants such as the county's.

"It's certainly unfair to independent power producers like the one in Hillsborough County," said Joseph Treshler, vice president of business management and development for Covanta.

Hillsborough County did two things.

It found another buyer in Seminole Electric Cooperative, a power wholesaler not bound by the same PSC rules, which now buys most of the 48 megawatts of power the plan produces. The cooperative agreed to pay 5.5 cents per kilowatt hour.

And the county began direct-wiring some of its buildings and its water and wastewater treatment plants directly to the generator operated by Covanta.

Avoiding a middleman as a power source is currently saving the county about $550,000 annually, Lyons said.

State rules only allow independent power producers to supply electricity to properties that they own and are essentially adjacent to the plant. The county owns roughly 300 acres of land in and around the plant and in recent years has built a mini-campus of government operations there.

County officials hope to be able provide electricity to much of it starting in 2015, from the Falkenburg Road Jail to the Animal Services department to warehouses and a possible new Emergency Operations Center.

"We're looking to basically power all of the county facilities out there," Lyons said.

Bill Varian can be reached at varian@tampabay.com or (813) 226-3387.

Hillsborough County cuts out utility middleman to save money on energy 05/19/12 [Last modified: Saturday, May 19, 2012 5:31am]

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