Now that the city council has voted to negotiate contracts with Pyrolyzer for generating electricity from trash, we should not only plan for the best-case scenario, but also the worst.
Best case: Mr. Pyrolyzer’s predictions come true. We rely on contracts to process 4,000-plus tons of trash per day, binding for 20-some years, that will enable us to pay off the facility.
Worst case: the predictions do not come true. We “throw the switch” to natural gas, and those same contracts — that obligate us to dispose of other cities’ trash for the next 20 years — become a liability.
Even if those trash contracts are signed by “outside investors,” we must still guard against any guarantees that are made by the city of Logansport. Waste-to-energy schemes have caused other cities to come close to bankruptcy (Detroit, several times over the last 20 years) or actually go bankrupt (Harrisburg, Pa).
If Logansport does make a deal with Pyrolyzer, one contract that definitely will be signed is the one that locks us into being Pyrolyzer’s customer for 20 or so years, at a beginning rate of 5.5 cents per kilowatt hour.
Logansport does not benefit from this deal. On March 6, the open market price for electricity was 2.872 cents/kilowatt hour. Of course there are added costs to bring that electricity to homes or factories, whether from the open market or from Pyrolyzer. Obviously the open market varies, though the average over the last couple of years has been much lower than 5.5 cents. The point is that the market is depressed, and we are considering locking ourselves in at too high a price. We have already spent too much on Peabody coal and Duke power because we signed high-priced contracts. Let’s not make the same mistake a third time.
Pyrolyzer definitely benefits from this deal. The problem today for such investor-owned plants, trying to make a living on the open market, is that the price of power is so low that no one is willing to buy electricity at the price that the plant needs to be profitable.
Pyrolyzer wants a contract for a high rate, that can increase over time. They need the income of this contract with Logansport, because any excess power will have to be sold at competitive prices on the open market.
Let’s think carefully before we sign.