AUSTIN-The city of Austin bought a wood chip-fueled biomass power plant in East Texas for $460 million to break away from a punitive contract, a move energy officials called one of the largest single purchases in the city's history.
Southern Company, owner of the Nacogdoches Generating Facility, accepted the offer made by Austin Energy on Wednesday.
Austin Energy General Manager Jackie Sargent said the city is now off the hook for escalating annual payments under a 20-year, $2.3 billion agreement with Southern Company.
The agreement was slated to run through 2032, the Austin American-Statesmen reported. Austin Energy is also acquiring Nacogdoches Power LLC, the plant's holding company for the biomass facility.
Sargent added the city's utility service is projected to save $275 million in their purchase of the plant. The city has been the plant's lone client since 2012.
The City Council approved the purchase in March.
Under the Southern Company contract, Austin Energy would have mounting yearly payments whether or not the city purchased energy from the 115-megawatt plant in Sacul, about 30 miles northwest of Nacogdoches. Those costs were expected to increase to a projected $90 million in the agreement's final year.
"What this allows us to do is to avoid significant future costs had we remained under the power purchase agreement that we had with (Southern Company)," Sargent said.
Mayor Steve Adler said he has occasionally taken a look at the "one-sided biomass contract" since taking office in 2015. Adler added it was "welcomed news" when he realized the plant was for sale.
"We went from a tenant position to buying the home, and the house payments are less than the rent," Adler said.
Austin will continue staffing the plant and its operations will be included in the city's infrastructure portfolio, Sargent noted, but the future of the biomass facility remains unclear.
"We will continue to do resource planning, and we will evaluate the future economic viability of this facility through that process," Sargent said.