Burning Up Harvard's Money
"No report for the year would be complete without some mention of the Medical Area Total Energy Plant which is now under construction and which remains one of the University's most significant financial concerns. Delays and changes in environmental approvals, increasing construction costs, radical and unprecedented increases in interest rates, and the dramatic growth in energy prices have combined to alter many of the assumptions on the basis of which this facility was planned." Introduction to the University's 1978-79 Financial Report
University officials don't like to talk about the Medical Area Total Energy Plant (MATEP). The story of the power plant is one of interminable delay, confusing environmental issues, strained community relations and page upon page of complicated and very dull data. But the bottom line is very simple: what once seemed like a great idea has gradually become an administrative and financial disaster.
The power plant goes "on line" next week for the first time when it starts to privde chilled water and steam heat to some of the 13 institutions in the Medical Area it is designed to serve. But MATEP won't be churning out the thousands of kilowatts in electricity that it must produce to be cost-and energy-efficient. Designed to replace the ancient (circa 1909) facility which has serviced the Medical Area for 20 years longer than it should have, the key to the new plant is cogeneration--its ability to produce three types of power from one central source.
But University planners have still been unable to secure state approval for installing the diesel engines which will produce the bulk of that electricity. Community groups in the Misison Hill and Brookline area have argued that the plant's diesels will spew dangerous nitrous oxides and carcinogens into their backyards. A series of state agency recommendations and rulings handed down this year have done nothing but further delay a project that is already several years late.
In the early 1970s, when University officials first decided to build a new plant to beat the rising cost of oil, the power plant seemed like a dream come true. But as community protests and environmental hearings have delayed the project, inflation and bloated interest rates have driven the price of the plant, originally estimated at $40 million, to about $200 million. The power plant was originally slated to save $2 million in its first year of operation, but given strict environmental operating conditions and delays, Thomas O'Brien, financial vice president, now says MATEP won't save money for at least six or seven years.
At the beginning of the year, when one state official recommended that the power plant be allowed to install its diesels, things were looking good. But prospects for the diesels continued to slide downhill as one delay after another tacked $50 million more on the price of the plant. Finally, last week, the deputy commissioner of the state Department of Environmental Quality Engineering (DEQE) handed down yet another ruling against the Harvard-backed proposal.
To compensate for the delays, the University tried this year to lobby in Congress for a tax credit that would help defray construction costs for cogeneration facilities. But it was a tax credit, and as Parker L. Coddington, director of government relations says, "tax credits have a very hard time in the Ways and Means Committee." The University lobbied hard for the proposal but eventually it died. "We were running against a very strong current," Coddington explains, adding, "it was not just somebody taking aim at Harvard or at MATEP."
In an attempt to anticipate rising costs closer to home, the three schools in the Medical Area jacked up their tuition for next year between 15 and 20 per cent. At the Medical School, where tuition went up 20 per cent, Mitchell L. Adams '66, dean for finance and business, says the power plant's rising costs had nothing to do with the unprecedented leap. Adams says 12 per cent of the rise simply matched the inflation rate, and the remaining 8 per cent will make up for the cutoff of federal capitation funds, part of Congress's recent budget-trimming. "If there were no power plant, we would have had the same raise," he says. But sources close to the Medical School say that even if Adams is speaking the literal truth, rising power plant costs cannot help affecting tuition at the three schools as well as patient costs at the new Affiliated Hospital Center, scheduled to open in July. "Harvard has sunk one hell of a lot of money into this project," one source says, adding, "it's like shoveling money into a hole in the ground." Harvard has advanced thousands and thousands of dollars for the project and, with inflation rising in double digits, many say the University is sitting on a white elephant.
On the surface, however, officials continue stoically to predict success. O'Brien insists that Harvard is not developing an alternate electricity-generating plan, one that is not based on installing the diesel engines. Rising oil prices, he says, will eventually help oil-efficient MATEP pay for itself faster. Joe B. Wyatt, vice president for administration, says the power plant's rising costs are similar to problems with the Seabrook and Pilgrim II nuclear power plants. "The initial estimate has practically no bearing on the costs because of the environmental questions," he says, but adds that he is optimistic the project will succeed. O'Brien agrees, noting that although MATEP has been "a very painful process" for the University, "as a businessman, I would do it again."
For his part, Adams dismisses community concern, an attitude that has characterized the official University line. "I think they're bananas," he says, adding, "The fact that a whole bunch of people are unhappy is no big surprise. A lot of people are unhappy these days." Adams is convinced, moreover, that the whole project will turn Harvard's way. "I have no doubt whatsoever that in a number of years everybody involved will be happy that the University built this power plant," he says.
But O'Brien admits that the total cost of the plant "depends on when the diesels are installed." Given the DEQE's record for delays and the fact that the University may soon by forced to go to court--a process that would add at least two or three years to the project--the MATEP controversy could go on forever. In inflation continues to run in double digits, it is not inconceivable that the project will eventually end up costing the University ten times what it originally set out to pay.