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Guaranteed savings' in question after methane burner fix (05/15/2013)
By Chris Rogers

After four years and tens of thousands of dollars, the city of Winona's methane combustion project is finally working properly, city staff say. However, how much the project has cost the city, and whether the company behind it will be required to repay the city for unrealized savings as promised, has yet to be determined.

In 2008 the city signed a $1.7 million contract with Seattle-based McKinstry Essention Inc. for a variety of energy-saving projects, including a project to capture and burn methane gas for energy and heat production at the Waste Water Treatment Plant (WWTP). That system was installed in 2009, but has been plagued by a major problem: half of the system could not consistently burn methane.

A 2010 McKinstry report stated that the $800,000 methane project was struggling. It was $18,000 behind in its "guaranteed energy savings" and also required $22,000 in unexpected operational costs. The city borrowed money to finance the McKinstry contract and is currently making bond payments. The cost of those payments was supposed to be covered, in part, by energy savings generated by the methane project. How much money the city has had to take out of other funds to cover the shortfall in savings and make its bond payments is anybody's best guess. In previous conversations with the Winona Post, Public Works Director Keith Nelson stated that, to his knowledge, information on how much the project has saved after 2010 does not exist. Presumably there have been continued shortfalls, since, for over a year, half of the system was burning natural gas purchased by the city rather than the methane it was designed for.

Last week, City Council member George Borzyskowski asked Nelson for an update on the status of the methane system including the project's financial history. Nelson reported that the project is now burning methane and operating correctly. Nelson explained that last month subcontractors working on the equipment figured out the problem: the methane needed to be under higher pressure.

Nelson has yet to provide the council or the public with a report on the financial aftermath of the project's years of disfunction.

The city entered into the contract with McKinstry using a state statute that exempts guaranteed energy-saving projects from typical requirements to solicit bids for contracts and seek voter approval for significant borrowing. The exemption only applies if savings are guaranteed.

The project was presented as having such a guarantee. A McKinstry representative promised the city council that if projected energy savings were not met, the company would write a check for the difference.

However, the language of the contract itself is less clear on whether the projected savings are guaranteed. Early this spring, City Manager Judy Bodway told the Winona Post that the guarantee was in place. However, Bodway said that the city had not asked McKinstry to follow through on its guarantee and reimburse the city for lost savings. Nelson reported this week that the city has still not asked for reimbursement.

In 2011, rather than ask for lost savings, the city accepted a plan from McKinstry to install new equipment at the company's expense to fix the problem. The new equipment did not fix the problem. However, city records and a McKinstry spokesperson indicate that the city did not contact McKinstry regarding the ongoing issue until this past winter, when McKinstry reached out to the city following inquiries by the Winona Post.

 

 

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