Dispose of power plant?
ESCANABA – While Escanaba continues to wait for its power plant to be sold, voters will be asked to allow the city to dispose of the facility if the pending sale falls through and current operational funding stops.
During its regular meeting Thursday, Escanaba City Council approved proposed ballot language for a May 6 election to decide if council shall be authorized to dispose of the power plant.
Voters have already authorized council to sell the property but another vote is needed to authorize council to shut it down or dispose of it.
“The first choice continues to be to sell the plant,” stressed Mayor Marc Tall at Thursday’s meeting, noting other options are being considered now to protect the rate payers in the future.
Escanaba Green Energy (EGE) has been in the process of purchasing the power plant for nearly two years, experiencing several delays in financing a $34 million loan to buy the property and convert the facility to burn biomass. The city is selling the plant and 17 acres for $4 million.
During an update on the sale during a joint meeting with council and the Electrical Advisory Committee (EAC) on Wednesday, EGE President Charles Detiege said the loan process is moving forward with the finalization of documents and the transfer of funds from Europe expected next week.
The city is selling the coal-fueled plant because it is less expensive to buy power from a supplier – which the city is currently doing – compared to generating electricity by burning coal. With the disposal of the plant, the city would continue to purchase energy but not have operating expenses.
Because of the uncertainty of the pending sale and the cost to operate the plant, council is seeking authority to retire the plant in the event the sale fails and the city has to pay for operations.
According to Electric Superintendent Mike Furmanski, the city is “close to breaking even” with current electric rates because the plant’s operating costs are being paid for through a reimbursement from Midwest Independent Transmission System Operator, Inc. (MISO).
In December 2011, the city sought MISO’s approval to shut down the plant. MISO denied the request and is paying Escanaba $3.7 million annually to continue operations on stand by mode because the facility provides reliability and additional transmission for the regional market.
City Manager Jim O’Toole noted, “As long as the (MISO agreement) is in place, we would not anticipate shutting down the plant.”
The city is in its second year of receiving the MISO funds. The current agreement expires in June, said Furmanski, explaining that MISO may or may not renew the funds. MISO can also terminate the agreement with a 90-day notice, he said.
“It’s impossible to predict what MISO’s going to do,” he told council. “We just have to go with what they tell us to run the plant.”
If MISO were to stop paying for the plant’s operations, the city could assume the annual fixed costs of $4.5 million, said Furmanski, adding this could represent a customer rate increase of approximately 30 percent.
If MISO terminates or does not renew these funds and if EGE’s purchase falls through, the city could immediately start the process to retire the power plant if voters approve the proposed ballot issue, he said. The city’s request to retire the plant involves a six-month study by MISO, he added.
Without voter approval and without MISO funding, the city could reduce staffing and operate the plant on at an estimated cost of $125,000 a month, or $1.5 million a year. A rate hike of approximately 10 percent would be needed to cover operational costs, said Furmanski.
According to state election laws, the city must notify the Delta County clerk by Feb. 11 if the city wants to place a proposal on the upcoming May 6 election ballot. Ballot language must be approved by council and forwarded to the county clerk’s office by Feb. 25.
The next available election date would be in August.
During an Aug. 12, 2013 joint meeting of council and the EAC, both parties discussed placing a proposal to dispose of the plant on the November 2013 ballot. A motion to pursue the vote did not pass.
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Jenny Lancour, (906) 786-2021, ext. 143, firstname.lastname@example.org