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University Senate passes contested resolution to support energy privatization

Molly Farrell, a University Senate faculty member, voices her concerns of energy privatization and asks questions during a special session on April 4. Credit: Summer Cartwright | Senior Lantern Reporter

The University Senate passed a bitterly debated resolution in a special session held Tuesday, ultimately voicing support for Ohio State’s multimillion-dollar energy partnership proposal with ENGIE-Axium.

The votes, cast by paper ballot to ensure a correct count, consisted of 40 in favor, 22 opposed and 14 abstentions.

The ENGIE-Axium partnership is subject to approval by OSU’s Board of Trustees on Friday. The proposed deal consists of a $1.015 billion upfront payment to OSU, as well as $150 million to be put toward various academic needs that could include financial aid and compensatory enhancements for faculty.

OSU, in turn, would pay ENGIE-Axium $45 million each year (increasing annually 1.5 percent to cover inflation), an operating fee starting at around $9.2 million to cover the cost of maintenance and a variable fee tied to unknown capital investments.

University President Michael Drake — joined by Michael Papadakis, deputy chief financial officer, treasurer and vice president of financial services and innovation, and Bruce McPheron, executive vice president and provost — briefed the audience consisting of senate members and the general public on various facets of the proposed private-public partnership.

McPheron addressed concerns that there was not enough input from the OSU community in the selection process to decide which energy company to privatize with, as just three public meetings were held over the course of two years.

McPheron said the three groups played a major role in ultimately choosing ENGIE-Axium after what amounted to a two-year process, which were the President and Provost’s Council on Sustainability, a faculty advisory group and the Council on Physical Environment.

McPheron said the groups gave the OSU administration advice in crafting a pathway during the request for proposal phase.

“When we had the three bids in place, we asked them to give us their opinion that should the university step into a relationship, how the various businesses actually fared against one another, given the criteria we had distributed,” he said.

All groups, he said, chose ENGIE-Axium after considering a set of criteria that included academic collaboration, technical aspects, human resources and financing.

A major portion of the discussion revolved around OSU’s yearly payment fee to ENGIE-Axium.

Neil Tennant — a member of University Senate’s faculty council and a philosophy professor at OSU — created an spreadsheet with his own math of the potential inflation that could occur in the 50-year deal. He said the costs could leave OSU at a loss of money in the partnership.

Tennant said his calculations, which have not been reviewed by The Lantern, show that at a two percent inflation, OSU will lose over a quarter of a billion dollars in the 50-year deal. If the inflation rate is at zero percent, the university would lose $1.085 billion.

“Who did the math on this risky investment?” he said. “Who did the math on how much this will cost us with this annually occurring fixed fee to repay the $1.015 billion?”

Tennant also said documents OSU provided to the public regarding its partnership with ENGIE-Axium were too vague.

“I do not know what we’re paying for. I do not know what the risks are,” Tennant said. “What I do know is that as a logician and philosopher, I was rather taken aback at the question, ‘Why do we need a private partner to help with energy efficiency and conservation?’”

Papadakis countered Tennant’s assertions by going over ENGIE-Axium’s three main tasks in the partnership focusing on operations, sustainability and supply.

“Another thing to keep in mind is that the fixed-fee is at-risk,” Papadakis said. “If they don’t hit the targets, there are significant financial penalties that get deducted out of the fixed fee that comes back to Ohio State. For instance, if they don’t get the 25 percent (carbon footprint) reduction in 10 years, then we’re off significantly, at most $10 million or 10 percent revenue — whichever is greater — and that’s every year.”

He also noted that the annual returns from the $150 million endowment are expected to be more significant than the fixed fee OSU is paying.

Lastly, the University Senate voted on resolution changes proposed by Undergraduate Student Government.

As part of University Senate’s resolution, to be reviewed by the Board of Trustees before its Friday vote, an annual report must be obtained that includes endowment distributions, earnings and balance, sustainability projects and other initiatives funded through Comprehensive Energy Management Plan revenue, progress toward achieving the applicable sustainability goals, and operations of the research center.

This assurance included two additional measures on ENGIE-Axium company performance reviews by University Senate and various baseline metrics, said Sam Whipple, fourth-year in political science and economics and University Senate member.

“The first thing (USG) did was to slightly broaden the scope of the report to ensure that the company’s performance would be reviewed,” Whipple said. “Their performance in delivering the energy to the grid and investing in energy conservation measures and the human resources aspect.”

USG then proposed a change to include a baseline measure that would allow for comparison each year of previous numbers to be reviewed and approved annually by the Senate Fiscal Committee, the Council on the Physical Environment, the President and Provost’s Council on Sustainability and the University Research Committee, in their respective capacities. University Senate ultimately voted to create a broader scope of who could review the baseline measures.

As part of the resolution passed by University Senate, these inclusions, if passed by the Board of Trustees, will be communicated by ENGIE-Axium to the university annually and discussed by the senate at least every five years.

One comment

  1. Mark D. Stansbery

    The way I read the deal is that it puts OSU under ENGIE’s control of research and other academic functions for the next 50+ years, and OSU will pay over the next 50 years $2B to ENGIE (a $1B profit over investments), not a bad investment for the energy company. I hope the students and faculty will have heat and air when they need it. Also the French company might keep some unionized workers but mostly the energy trading company is not a producer of energy direct, but makes its money off of efficiencies in the industry which comes down to paying employees less compensation and reduced retirement systems, and by finding the least cost supplier for energy, which means AEP and other corporate sweat hearts mentioned in this deal are not assured of ongoing supply chains.

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