Downtown Energy May Shift To French Firm

September 5, 2008
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GRAND RAPIDS — The first step in turning over the operation of the steam-driven system that heats and cools most downtown buildings to a division of a French energy conglomerate takes place next week when city commissioners hold a public hearing on a franchise agreement with Veolia Energy North America.

Known as the District Heating and Cooling Operation, the system has been operated by Kent County since February 1990 and today it services 133 downtown customers.

The county Board of Public Works, which oversees operations, is continuing separate negotiations to sell the steam plant at 158 W. Fulton St. to Veolia Energy — a sale that doesn’t involve the city.

“This is Veolia’s core business, not the county’s. I think the county recognizes that. I think this is good for customers” said Deputy City Manager Eric DeLong.

The city and the county BPW have ironed out a franchise agreement with Veolia Energy officials that would have the city regulate operations rather than the Michigan Public Service Commission. The city’s charter gives it the authority to do so.

The proposed contract gives Veolia Energy the non-exclusive right to operate the system for 30 years, which leaves the firm open to future competition. The annual franchise fee, which would go to the city, would be $50,000. The contract also has an application fee of $10,000 and a $10,000 cost reimbursement.

The agreement also would cap rate hikes to the Consumer Price Index, and would limit the firm from requesting an increase to once every two years. The city could request a rate review every four years.

DeLong said Veolia Energy representatives will be meeting with the system’s customers this month and will offer a detailed presentation of its operational plans at the hearing on Sept. 16. City commissioners are likely to vote on the agreement on Oct. 7. If the agreement is approved then, Veolia Energy could take over operations on Nov. 24.

County commissioners also have to ratify the franchise agreement. Daryl Delabbio, county administrator and controller, said commissioners will likely do that in November.

DeLong said heating and cooling rates are expected to rise by an average 2.69 percent once Veolia Energy takes over operations, a smaller hike than the 3.8 percent increase that was expected to come from the county for 2009. The new fee structure will reportedly also offer customers an incentive to use less energy.

“I think this opens the door to a good, long-range agreement,” said David LaGrand, 2nd Ward city commissioner.

The county began talking with Trigen last year about having the firm buy the heating and cooling plant and running the system. At that time, Trigen owned and operated the largest portfolio of district energy heating and cooling systems in the U.S. Then Veolia Energy bought Trigen last November. Trigen still operates in 11 markets. Veolia has operations in 14 major U.S. cities, including New York, Boston, Philadelphia, Los Angeles, Houston and San Diego.

“Veolia is respected in the communities that its serves,” said DeLong.

Veolia Energy North America had revenue totaling $4.6 billion last year, over 1,100 customers and 31,000 employees. Veolia Environnement, its parent firm, is based in Paris, had total revenue of $48 billion in 2007 and about 300,000 employees in 2007.

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