GRU rate hike puts squeeze on local businesses

By Jenna Lyons | The Gainesville Sun

With a sweaty brow and quick feet, Joe Feulner prepped the kitchen as he explained why he won't be making any pizzas next summer.

"At my slowest time of the year, my overhead is the highest," he said recently as he stacked blocks of mozzarella cheese at Bella Donna's Italian Eatery, 1023 W. University Ave.

His 18-month-old restaurant lost a game of economic seesaw when the University of Florida's spring semester ended. Student traffic went down, and his utility bill soared, leading to his decision to close in the upcoming summer months.

The (electric bill) goes up significantly in the summer," Feulner said. "Trying to keep the place cool, you know?"

Feulner is hardly alone among local businesses struggling to make ends meet in a weak economy and now facing higher utility rates associated with the biomass plant that took effect Oct. 1.

While much of the focus has been on the increase of more than 10 percent in electric rates for Gainesville Regional Utility's residential customers, commercial users are getting an even-stiffer jolt of more than 12 percent.

That was quite a shock to Feulner, who said the temperature in the kitchen at Bella Donna's can reach 100 to 120 degrees Fahrenheit.

"I think the AC is what kills me the most," he said.

Although much of his overhead is fixed, the GRU bill is not. Feulner said it reached nearly $2,000 a month in the summer, before the rate increase. Last fall, the bill had been around $1,100 a month.

For one of GRU's largest service accounts, keeping cool is the main problem. Florida Food Service operates an 86,000-square-foot warehouse at 5201 NE 40th Terrace — half of which is refrigerated at varying degrees.

Because it is such a large account, Florida Food Services' rate change was calculated individually by GRU, said company president Joel Islam, a member of a Chamber of Commerce committee formed last year to study GRU.

The company usually pays around $25,000 to $28,000 a month but is expecting an 11 percent increase.

"We do whatever we can to be smart with our electricity needs," Islam said, noting that the company has installed an ultra-high-efficiency lighting system equipped with motion activation and upgrading doors to open and close quickly.

It helped, but not much.

"I don't like it," he said of rising rates. "It's something that the community needs to be concerned with."

Dean Cheshire, partner of family-owned Cheshire Companies and also a member of the Chamber committee, said the higher rates are hurting his leasing business. He said he just lost a prospective tenant who wanted to move outside GRU's services boundaries.

"Every single person that comes in is concerned about utilities," Cheshire said. "The impact has been profound."

With the city's "staggeringly high" price per kilowatt-hour, some businesses are choosing to locate elsewhere. "Their search criteria doesn't even include Gainesville because of their fear of GRU rates," Cheshire said.

In an attempt to soften the blow of the utility bill, he said, clients are trying to reduce their space needs.

Heather Remer, co-owner of computer services company ComputerCare LLC, leases with Cheshire and plans to downsize if utilities continue to rise.

"Maintaining the space to hire staff locally as opposed to outsourcing has been difficult," she said. The last utility bill for her 3,200-square-foot space at 4581 NW Sixth St. topped $1,000.

At Southern Charm Kitchen, opened in 2012 by the owners of the Reggae Shack Cafe, the utility bill is far from charming.

"The rate over there is absolutely ridiculous," owner Omar Oselimo said. He doles out about $5,000 a month for the 32-seat, 1,200-square-foot restaurant at 1714 SE Hawthorne Road. At the 2,100-square-foot Reggae Shack Cafe, he pays a little more than $3,000 a month.

Oselimo had GRU perform an energy assessment at Southern Charm Kitchen, and he said the exhaust system in the building as well as the dishwashing machine consume a lot of power.

As business has grown busier for Oselimo's restaurants, they use more electricity, he said. Energy use has become such a problem in the past two to three years, he said he is considering using solar energy. After researching and meeting with local vendors, he said the only thing holding him back is the high up-front cost.

"I do understand that GRU is one of the No. 1 sources of revenue for us as a city," he said, but "as a city we need to look into different sources of revenue."

The Chamber of Commerce's task force that is examining the rising utility rates and other electric utility issues is expected to issue an official report on energy use in November. It also will analyze GRU governance, the general fund transfer and how GRU compares in a peer review of other utilities.

"This is an issue of a large scale," said Kamal Latham, the Chamber's vice president of public policy. "Energy is a complicated issue."

Being a municipal utility, GRU provides a certain amount of revenue to the city annually, known as the general fund transfer, Latham said.

The City Commission, he said, can determine the amount of the general fund transfer, which is currently about 10 percent of GRU revenue. GRU paid about $36.7 million in fiscal year 2013, and the transfer will increase to about $38.1 million in fiscal year 2014.

According to a U.S. public power peer study released by FitchRatings in June 2013, 27 utilities nationwide were in GRU's "AA-" Rated Senior Debt credit rating category, and the median general fund transfer payment as a percentage of 2012 operating revenue was 5.8 percent. GRU's 10.2 percent transfer amount ranked as the second-highest transfer amount in its peer category after Tacoma Power in the state of Washington, which was 10.9 percent.

Latham said the problem is finding an acceptable level of revenue transfer. "If you have an amount too low, (the city) may not get enough to offset what it gets from property value," he said.

About 58 percent of property value in Gainesville is not taxable because of public entities such as the University of Florida, so the city receives less property tax revenue than it normally would.

At the same time, Latham said if the transfer is too high GRU has less money to run operations, which is less favorable for credit ratings.

The issue of GRU commercial rates affects more than just a few businesses. Latham called it a community problem.

"That's a concern for us," he said. "We want to have an environment in this Gainesville region which is conducive to economic growth."

For some owners, the higher rates are just part of doing business.

At the corner of Southwest Fourth Avenue and Southwest Seventh Terrace, a green window banner outside of Wise's Pharmacy reads "Proudly Serving Gainesville For 75 Years."

In the 65 years the current location has been open, bookkeeper Cynthia Stehouwer said, the utility bill has never been a problem.

She heard about the increase and "took it for what it was."

The impact shouldn't be steep for the pharmacy, Stehouwer said, but if it were an increase of more than 25 percent it would start to cut into such items as facility improvements.

"What can you do?" she said. "There's nothing you can do about it. It's not something you can negotiate."

Staff writer Christopher Curry contributed to this report.

Virginia MacKoul

Virginia is a graduate from the University of Florida's College of Design Construction and Planning with a degree in Sustainability and the Built Environment, and a minor in Urban Regional Planning. Virginia joined the Front Street team in 2011, as an intern. Upon graduation, Virginia joined the Front Street team full-time as the Director of Client Services. Ms. MacKoul’s addition furthers Front Street’s continued growth and expansion within Gainesville and other North Central Florida markets. She was promoted to Director of Marketing in 2014 and now manages the firm’s team of interns and oversees all marketing and branding activity. Virginia was born in Boston and moved to Lee County, Florida in 1997. Virginia graduated her high school's International Baccalaureate program and started at the University of Florida with a focus on Architecture. Virginia shares Front Street's passion of giving back to the community and those in need. Virginia's hobbies include photography, cooking, football, movies, music, and spending time with her dog, Brinkley.

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