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Losing steam.

Byline: Greg Bolt The Register-Guard

Last winter, some visitors to the DIVA gallery in downtown Eugene didn't seem to spend much time lingering over the art.

The issue wasn't what was on display; it was the lack of heat.

DIVA - the Downtown Initiative for the Visual Arts - is one of many small businesses and organizations downtown feeling a cold squeeze as the Eugene Water & Electric Board phases out its aging steam heat system. Bills are rising faster than the vapor from a manhole cover as businesses upgrade to new heating systems, leaving fewer people on the steam lines.

Because EWEB has large fixed costs to provide the steam, every time a customer drops off the system, the cost for everyone remaining goes up. Those bills are hitting places such as DIVA hard.

"It's just really expensive for us," said Mary Unruh, the executive director. "Last winter we tried to cut down as much as we could. We were freezing in here, and it was very expensive freezing."

The good news is that EWEB is close to wrapping up a deal with the Oregon Department of Energy that will make low-interest loans available to many of the remaining steam customers. The loans will pay to buy and install natural gas or electric heating systems that are so much more efficient that monthly heating bills and loan payments together shouldn't be any more than customers are paying now for steam.

But installing that many new heating systems at roughly the same time will be a tall order. There's no guarantee that a small number of customers won't be socked with sky-high steam bills because they're the only ones left using steam while waiting for a new furnace.

"We're going to do the best we can to avoid that," said Mike Logan, EWEB's key accounts manager.

The EWEB steam system is a throwback to a time when steam could be generated cheaply and pumped through pressurized pipes beneath downtown streets to industrial customers and small businesses, heating buildings and running machinery. But high costs, the loss of several major customers and aging and inefficient infrastructure has led the EWEB board to pull the plug on steam.

It won't happen all at once. The system is being phased out over almost three years, but already the number of steam customers has dropped from 124 in 1985 to 75 today. Still, that represents 3 million square feet of space heated by steam.

The biggest piece of that is Sacred Heart's University District hospital, which is expected to stop using steam when its current contract expires in 2012. EWEB long ago lost its other two major steam customers, the Agripac vegetable cannery and the Chase Gardens plant nursery. The looming loss of Sacred Heart is one of the major factors driving EWEB's phase-out of the antiquated system.

One reason smaller customers are feeling the pinch is that the pipes have to be charged with steam regardless of how many people use it, so each time another customer switches over to electric or gas heat, EWEB splits the cost of steam among fewer accounts and the price goes up. Add to that the fact the EWEB now must generate steam using more expensive natural gas - instead of hogged fuel, a kind of sawdust made from sawmill waste that was once cheap and plentiful - and the bills go up even more.

For example, one customer in a downtown business paid $311 to heat about 2,500 square feet with steam in January 1995. By January 2004 the bill was $552, and this past January it was $1,165. EWEB provided the figures without naming the customer, but the scenario is familiar to steam users.

More than a few of those customers are the small, non-profit organizations that have taken up some of the low-rent, once-empty storefronts downtown. With shoestring budgets, they're having a hard time paying the bills.

"There's been times when it's more expensive to heat this very small office than my entire home, which is heated with electricity," said Beth Little, general manager of the Eugene Saturday Market, which has an office downtown. "So it has begun to hit us hard."

Ginevra Ralph, co-founder and education director of the Shedd Institute for the Arts, called her agency's bills "ghastly." The stately but aging former church that houses the institute needs weatherization and other upgrades, and in the meantime there's nothing to do but keep a close eye on the thermostat.

"We're very, very careful about when the heat is on and what it's used for," she said. "We're more diligent than ever in trying to make sure we're economic in our use of heat."

It looks like help is on the way, though. Logan said EWEB expects to get approval this week for a plan that would qualify steam customers for the state's low-interest Small Scale Energy Loan Program, which provides financing for projects that significantly improve energy efficiency.

Logan said many businesses would not qualify individually for the program because the efficiency improvement wouldn't be large enough to meet the program's rules. But EWEB lobbied the state to look at the conversion of all the steam customers as a single project, and the state has tentatively agreed.

"It allows us to offer a financing solution to all of our customers," Logan said.

The program is a boon because the credit crunch stemming from the recession has dried up many sources of small-business financing. The state program offers 15-year loans at 5 percent interest, terms hard to find for many small businesses these days.

Logan estimates that converting all of the remaining steam customers to other forms of heat will cost $10 million to $12 million.

But the loan program might not help everyone. Some probably won't have good enough credit scores to qualify, something that could be a particular problem for the smaller nonprofits.

But EWEB is working on a solution for those customers too. Logan said one idea is to set aside money for a "decommissioning fund" that would provide loans on similar terms to businesses that don't qualify for the state program.

The plan hasn't yet been presented to the EWEB board, but Logan said the aim is to have some kind of fall-back or safety net to help any customers that don't have the needed financing to switch off steam. He said the last thing EWEB wants is to lose a downtown business.

"That's what we're trying to avoid here," he said. "We don't want our approach to create more problems for downtown Eugene."
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Title Annotation:City/Region
Publication:The Register-Guard (Eugene, OR)
Date:Nov 2, 2009
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