Ness: Steam Plant Improvements Have Failed

By KBJR News 1

September 8, 2010 Updated Sep 8, 2010 at 2:07 AM CDT

Duluth's Mayor is asking a global company for millions of dollars to make good on the promises he says it didn't deliver.

DULUTH, MN. --- Duluth's Mayor is asking a global company for millions of dollars to make good on the promises he says it didn't deliver.

Duluth Mayor Don Ness says in 2006 Johnson Controls, Inc. guaranteed The City measurable savings by retrofitting the Canal Park Steam Plant with cost-saving improvements to machinery and infrastructure.

The company operates in all 50 states and dozens of foreign countries.

But instead of saving millions, Ness says the Duluth Steam Plant Co-op has pocketed far less after the so-called 'improvements.'
Official estimates calculate those savings at $100,000 per year instead of the $330,000 per year Ness says JCI promised.

"We're saying we need a settlement right now," Ness said, describing his request for more than $5 million City dollars used to finance the operation.

"We need them to fulfill their end of the bargain and to find a fair settlement to the taxpayers of Duluth and the rate-payers of the Steam Co-op," Ness added.

In a media release today, Johnson Controls responded to the mayor's request. A portion of the release appears below:

"Negotiations between JCI and the City of Duluth have broken down regarding the amount JCI should pay for energy-savings shortfalls on its work at the Duluth Steam Cooperative, forcing a lengthy and expensive arbitration process to determine the appropriate payment. These negotiations have ended despite the recommendation from the Steam Cooperative’s board of directors that the proposed resolution is appropriate."

"JCI was hired by the City of Duluth in 2006 to make numerous upgrades to the Steam Plant and more than a mile of underground piping under a “performance contract,” in which JCI guarantees a certain level of annual savings. If such savings were not reached, JCI agreed as part of the contract to pay the full difference between the realized savings and the actual amount. This is still JCI’s intent – to ensure Duluth taxpayers get exactly what was promised in the contract."

A formal mediation session between the City of Duluth and JCI is scheduled for April 2011. However, City Officials say the meeting is too little, too late.

According to JCI, this would be the first time JCI, which has had an office in Duluth since 1956, has ever needed to issue a shortfall payment for any of its Duluth-area projects.

Written for the web by Matt Standal