Tuesday, December 14, 2010

I change my mind on the Hartlebury Incinerator?

I dealt with the pros and cons of the proposed Hartlebury Incinerator at the beginning of the year and from the arguments presented came down on its side. However as seems to be the case with our current form of trickle-feed government some more information has been exposed over at the WFA.

So no more NIMBYism or potentially biased sources 'tainting' the discussion.

The incinerator is a private enterprise, therefore the council will have to pay by the ton to have it incinerated; this is fair enough. However it appears that there isn't enough waste generated within the county to meet the burner's capacity. So what? Well if capacity isn't met it seems that the council will make up the shortfall in expected revenue.

This isn't much different to a standard locked in contract - you sign up to telephone services (e.g.) for 2 years at a certain rate. The rate set is predicted on you using their services for that period, if you try to leave they might not yet have made any profit out of you and therefore include a clause to charge you to make up the potential loses.

This leads to the question posed by Louise essentially - what's to stop the incinerator opening up a recycling centre next door? So they get paid by the ton; remove the recyclable bits, get paid for selling that; get paid for generating electricity; and then get paid if it's not enough waste.

It gets worse - are they paid by the ton delivered, or by the ton burned? If it's the latter by recycling more they are reducing the weight which automatically qualifies them for the shortfall money. How much do they get and how is this decided - we don't know. It's our old friend company confidentiality.

What we have here seems to be a standard government type PFI contract - you take the profits; we'll take the risks. The assumption in all these cases is that the incentive is for the private company to exceed the targets to make more money over the base stipulation. Except there's also an incentive to do nothing except maximise the profits via a reduction in quality etc. - if I get paid a fixed fee regardless of my output and can  increase my spending money by either working harder or cutting my costs... which road will be taken?