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OSU enters 1st part of plan to privatize energy

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Smoke rises from McCracken Power Plant on Feb. 18. Credit: Kat Niu / Lantern photographer

Smoke rises from McCracken Power Plant on Feb. 18. Credit: Kat Niu / Lantern photographer

It takes a lot of money and resources to power a campus as large as Ohio State’s, but one expert said the privatization of energy isn’t all that different than that of other campus services, like parking.

“Energy costs money to produce, to distribute and to maintain,” said Donald Cohen, executive director of In The Public Interest — a national think tank dedicated to issues surrounding government contracting and privatization of public services.

OSU’s energy management project, which began its first phase Feb. 17, aims to privatize the management of OSU’s energy. The university is seeking a private partner to assume the operation of the university’s utilities, including natural gas, electricity and the heating and cooling of water. For now, it would cover OSU’s Columbus campus — approximately 450 buildings and 22 million square feet of space, according to the project’s website.

The first phase of the project seeks to “gauge interest from potential partners,” according to the website. The RFQ — request for qualifications — document is now available for vendors (and those interested in reading it) online and will stay open until early-to-mid-April, said OSU spokesman Gary Lewis in an email.

Lewis said the university has been “pleased by the interest so far by potential partners” but declined to comment as to how many submissions it has received at this point.

The university will share details once the RFQ deadline has passed, but doing so now would be “premature,” Lewis said.

“Potential partners have been told they can submit responses at any point up to the deadline, and sharing details before then would not shed any helpful light on the process,” Lewis said.

Cohen said, however, that privatization of services comes with a price.

“Privatization costs more money,” he said, citing executive salaries, lobbyists and the need for a rate of return as examples of additional costs when something is privatized.

These costs are money lost, Cohen said, adding “all of those dollars go away, as opposed to into the system, to either keep the costs down or to improve the system.”

But this energy project isn’t the first time OSU has sought to enter into private contracts.

In 2012, OSU privatized its parking when the university signed a 50-year, $483 million contract with Australian investment firm QIC Global Infrastructure to create CampusParc. OSU also holds private contracts with Coca-Cola Co., Nike Inc. and Huntington Bank, along with other companies.

According to the project website, the energy management project seeks to “reduce energy use, secure the best rates, provide great service and support research.”

As far as energy conversation goes, Cohen said the ideas might be worth the university’s money, but the management is not.

“In terms of energy efficiency, it may very well be that some private company has ideas on how to save money on energy, and if that’s the case, let’s hire them to give us the ideas, but there’s no need to hire them to run it,” Cohen said.

If the companies can make money doing it, Cohen questioned why the university wouldn’t want to do it themselves to “either generate the income or, more importantly, generate the savings to keep college, university expenses down.”

Similarly, the University of Oklahoma entered into a 50-year contract for the management of its energy in 2010. The university is estimated to save $38 million to $66 million during the course of the contract.

The duration of OSU’s contract is unknown at this time, and Lewis said it will be discussed upon completion of the RFQ deadline.

Cohen said he thinks Oklahoma’s 50-year contract is “a long time to lock yourselves into a contractual obligation to keep a company profitable,” though.

“Fifty years is a long time. Thirty-five years is a long time. Things could change; you want flexibility,” he said.

As for whether more universities will follow suit and privatize their energy down the line, Cohen is unsure but said, “if there’s a market — if there’s money to be made — then there are companies that are going to be promoting these ideas, and they often promote them by saying ‘we’re going to be doing things better and more efficiently and more green and save money’ … but again, the devil is in the details. If they can make money, why can’t (the universities)?”

5 comments

  1. “Fifty years is a long time. Thirty-five years is a long time….” Now, THAT’s an understatement! But, the university is gonna do whatever it wants, anyway, “hell be damned”.

  2. “In terms of energy efficiency, it may very well be that some private company has ideas on how to save money on energy, and if that’s the case, let’s hire them to give us the ideas, but there’s no need to hire them to run it,” Cohen said.

    If the companies can make money doing it, Cohen questioned why the university wouldn’t want to do it themselves to “either generate the income or, more importantly, generate the savings to keep college, university expenses down.”

    Cohen said he thinks Oklahoma’s 50-year contract is “a long time to lock yourselves into a contractual obligation to keep a company profitable,” though.

    ——————————————-

    Those statements pretty much sum up why this is a bad idea for OSU. Hopefully senior management will come around to that line of reasoning…

  3. The people who are pushing this deal are the same people who did a buddy deal with AEP Energy, the highest bidder in a questionable bid process, which locked in peak electricity prices for the next three years costing the university millions of dollars a year.

  4. This is Parking Privatization all over again. The Administration will campaign and send email after email about why we should do this, but when they go ahead and pass it regardless of what students/staff/faculty think, it’ll be a silent footnote in the meeting minutes. I would love to know how many members of the Board of Trustees are profiting from this proposal.

  5. If the university is really serious about saving money on energy, why not look into burning methane? “NO JOKE” It is continuously being generated at the sewage treatment facility south of the city near 71and Grove City. They use a small part of it to run their generator for sewage treatment, the rest is just burned off outside. They are burning it 24 hours a day! Couldn’t it become a new fuel source for the McCracken power plant? Wouldn’t that save money in the long run? Has anyone even bothered to look into it? Gee, if I were a consulting firm how much would OSU pay me for that suggestion regardless if they used it or not? How many state jobs could be saved if it did work?

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