Kent County is next in line

October 20, 2008
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The next step is for Kent County to sell its downtown steam plant to Veolia Energy North America, now that city commissioners ratified an ordinance that awarded a heating and cooling franchise to Veolia Energy Grand Rapids LLC.

The county Board of Public Works has operated the system that serves 133 downtown customers since 1990 and began negotiating the sale of the District Heating and Cooling Operation at 156 W. Fulton St. with The Trigen Cos. more than a year ago.

When the talks got started, Trigen owned and operated the largest portfolio of district heating and cooling systems in the U.S. as part of Thermal North America, a Boston-based company with more than 1,200 customers in 11 American cities.

Then Veolia Energy bought Trigen last November.

Veolia Energy is the leading provider of energy services to municipalities and businesses in Europe and has its home office in Paris. The company was founded 150 years ago and has a North American division that oversees operations from Cambridge, Mass., and Montreal.

“Turning the DHCO over to a company who specializes in operating these unique facilities efficiently is a ‘win’ for the customers and a ‘win’ for the county,” said Art Tanis, county commissioner and chairman of the Public Works board.

“The county Public Works board and staff determined that continuing to own and manage this facility would not be in the best interest of our customers or Kent County residents,” Tanis added.

Kent County Administrator and Controller Daryl Delabbio said county commissioners could complete the sale of the facility by as early as next week, as Veolia Energy is expected to begin operating the system Nov. 24.

The franchise agreement Deputy City Manager Eric Delong and his staff reached with Veolia officials is a 30-year, non-exclusive arrangement that has the energy firm paying an annual fee of $50,000 to the city, along with a $10,000 application fee and a $10,000 cost reimbursement.

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

DeLong said heating and cooling rates are expected to rise by 2.69 percent once Veolia Energy takes over operations, a hike smaller than the 3.8 percent that was expected to come from the county in 2009.

The agreement caps rate hikes to the Consumer Price Index and limits the firm from requesting an increase to once every two years. In turn, the city can request a rate review every four years.

Veolia Energy had a choice of being regulated by the city or the state Public Service Commission, and the firm chose the city.

Veolia Energy North America had total revenue of $4.6 billion last year and 31,000 employees. Veolia Environment, its French parent firm, had total revenue of $48 billion in 2007 and about 300,000 employees.

The DHOC system has four industrial boilers that have a capacity output of 450,000 pounds-per-hour. About 260,000 pounds-per-hour are needed to meet the peak heating demand in winter. The boilers can burn natural gas or low-sulfur fuel oil and are backed by another 150,000 pounds-per-hour that is generated by the county’s waste-to-energy facility and sent through a 1.5-mile pipeline that runs between the two buildings.

“Sometimes you just have to take a hard look at what you’re doing and say, ‘Maybe there is someone else who can do this better.’ Philosophically, I don’t think anyone has a problem in turning this back over to the private sector. We got this from Consumers Energy when it probably would not have continued. We upgraded it and took it to another level, but we think we’ve done all that we can,” said Bill Allen, director of the county’s waste-to-energy operation.

“We think the system itself has been a very positive factor for downtown the last 20 years and we want that to continue. It’s a cliché, but it’s a win-win situation here if we can get everything knotted up and all the issues addressed.”

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