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The Hartford Courant

To Fill Budget Gap, Trash Authority Seeks Richer Subsidies

Facing $10 Million Deficit, CRRA Outlines Transition Plan Tuesday
By
Brian Dowling

No state burns as much of its trash as Connecticut does. Every day, six trash-to-energy plants burn about 5,600 tons of refuse, at least two-thirds of everything thrown away.

But the largest player in this decades-old system has run into serious problems. The Connecticut Resources Recovery Authority faces a $10 million deficit in three years, driven by sales trends that are not expected to reverse any time soon, according to an audit of the quasi-public agency's operations.

And if the agency's Hartford incinerator were to close, garbage costs would rise, and the state's ability to deal with the vast majority of its own trash in Connecticut would likely end, the audit said.

The trash agency, recently under scrutiny for high executive salaries, plans Tuesday to propose a partial fix that lets it tap into a more valuable class of state energy subsidies, the tier reserved for solar, wind and biomass projects, said Thomas D. Kirk, president of the trash-to-energy agency.

The higher subsidy would come from the same funds that clean energy projects rely on. Its impact would stitch up at least some of the agency's woes, to the tune of an estimated $8.9 million a year.

"Our input is perhaps we should get Class I [renewable energy credits] from that portion of our waste that is organic," trash like pizza boxes, food waste and old magazines, Kirk said. He said the category makes up about 40 percent of the authority's fuel.

It's not a new proposal. A similar idea last year met broad opposition. Energy Commissioner Daniel Esty said it would reduce recycling, hurt the clean power industry, and undermine "the environmental and public health rationale" for the state's energy policy.

Also, state officials and waste experts have asked if the trash agency's issues could have been fixed before it faced serious trouble.

"Simply put, there was a question as to whether the crisis was real," said Macky McCleary, deputy commissioner of environmental quality for the state Department of Energy and Environmental Protection.

"Being aware of the problem doesn't mean you have an easy solution to it," he said.

Effluence Of Affluence

The trash agency agency was created in the 1970s as one solution to a number of environmental and energy problems. At the time, milestone federal environmental regulations pinched the state's landfills and open burning of trash. Also, the oil crisis in 1973 stoked concerns about energy security.

"The idea of a networked system of waste-to-energy plants was a double-win," said Marian Chertow, a former president of the trash agency, who currently directs Yale University's Program on Solid Waste Policy.

Through 1973 legislation, Connecticut established the CRRA with bonding authority to help it build the more than $1 billion trash system. To secure the bonds, the state negotiated long-term contracts for municipal trash service and energy sales.

"There were environmental people who said why don't we recycle everything," said Chertow, who ran the agency from 1986 to 1988. "My position was this system can give us 25 years as a bridge to a world that will give us what we really want, what's best for conservation of materials, which is a recycling world."

In response, landfills closed — from 170 in the 1970s, to 100 in the '90s, to just one currently open receiving solid waste. Connecticut became a leader in the country in waste-to-energy, burning more trash per person than any other state, according to industry experts and a recent study from Columbia University.

But over the years recycling rates increased only slightly. The rate is now at about 24 percent, far short of the state's visions of 58 percent by 2024. "I'm struck that it's 25 years later and … the vision of this being a transitional system really hasn't been met," Chertow said.

In the past three years, the trash agency's long-term contracts for energy and trash-pickup have largely ended, wrapping up decades of stable cash flows. And the free market hasn't been kind.

Some municipalities left the agency for its private competitors, which offer lower prices and long-term contracts with set prices.

A plan to set up new long-term electricity contracts with another energy company turned out to be less than ideal. That company, Enron Corp., imploded as its ponzi scheme came undone, costing the Connecticut trash agency almost $200 million.

And earlier this year, the state offered another fix: Let government buildings buy the power from CRRA for $65 a megawatt hour, higher than the market rate but somewhat lower than the state's electricity providers. The legislation didn't pass. Instead, lawmakers asked for the outside audit, the agency-directed transition plan, and recommendations from a task force.

According to a draft of the transition plan reviewed Monday by The Courant, the agency's other proposals include selling unused property, reducing or cutting payments to Hartford in lieu of taxes, eliminating educational expenditures, and ending recycling rebates.

Squeezed Budget

In its audit of the trash agency's operations, Cohn Reznick, a New York tax and law firm, concluded more revenues are necessary to counter lower sales from energy and trash pickup.

Until recently, CRRA received $85 a megawatt hour. These days, the agency is making closer to $37 a megawatt hour, the audit said. Contracting towns have departed and signed on with other companies, trimming the agency's customers to 51 from 70, according to the audit. The agency, however, says the audit was wrong, and the actual number of customers dropped from 110 to 75. Trash generation per capita has also dropped.

But the audit's deep dive into CRRA's operations presented a picture of the agency lacking operational efficiencies and falling far behind its competitors in diversifying its revenue sources.

Top managers at the agency have higher average base salaries than similar utilities and waste firms, with more than a third of its 45 employees making between $101,000 and $292,000, the audit said. Also, it said, the efficiency of CRRA's incinerator has dropped almost 13 percent in recent years.

The agency's competitors have the advantage of being large national firms, and are pursuing other revenue sources. For example, Covanta Energy, which operates three trash-to-energy plants in the state, wants to build an anaerobic digester, which would turn compostable waste into methane for power generation.

Executives of the trash agency's competitors told auditors they didn't believe the South Meadows facility in Hartford was profitable, and they weren't inclined to acquire the facility and invest the necessary funds to make it profitable.

If the facility instead closed "the vast majority of the waste from South Meadows would have to be shipped out of state, resulting in over 64,000 truck trips to and from New York State, Massachusetts and Pennsylvania each year," the agency said in a draft of its transition plan.

Uphill Battle

The plan to increase subsidies for trash-to-energy power is proving controversial.

Though he called the idea of the state stepping in to fix the agency's problems "anathema," DEEP's McCleary said all options are still on the table. "The policy question is, Does the market properly reflect the benefits received by the society?"

Right now, the trash agency gets an extra 60 cents for every megawatt hour it generates, through the state's Class II energy credits, which cover trash-to-energy operations, and older biomass and hydropower facilities. The proposed change would push much of CRRA's electricity generation into the higher, Class I category, worth about $51 a megawatt hour, according to quotes from Skystream Markets.

And there's precedent for putting trash plants in the higher tier. Maryland, in its renewable portfolio standards, awards the state's trash-to-energy plants the higher subsidies. Although Connecticut's energy department is keeping options on the table, Esty last year came out against a similar proposal to increase subsidies in the state's clean energy program.

"Energy derived from resource recovery facilities should not be considered clean or renewable because trash-to-energy plants are neither cost effective nor efficient ways of generating electricity," he said, testifying to the legislature's energy committee in March 2012.

That sentiment echoed through the environmental and clean energy communities as news spread of the agency's renewed push for the change. "Trash incineration is solid-waste policy. It's not energy policy," said Chris Phelps, the state director of Environment Connecticut.

William E. Dornbos, Connecticut director of Environment Northeast, said, "Waste incineration, no matter how well done, simply does not fall into the category of innovative and sustainable clean power that deserves financial support from ratepayers."

Abe Scarr, director of the Connecticut Public Interest Group, predicts the agency's transition plan would be panned by the environmental community, and said the agency should offer some budget reductions alongside its big ask.

 

"It would behoove them to include some cost-cutting even if it isn't going to take care of the gap," he said. "Especially as they're asking ratepayers across the state to cover their deficit."

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