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Danville will invest in power plants
$500 million over 40-50 years will go to AMP-Ohio projects
Friday, December 28, 2007
By MICKEY POWELL - Bulletin Staff Writer
A neighboring city already has committed to investing in three American Municipal Power-Ohio power plant projects that Martinsville is considering investing in.
Danville will invest about $500 million over 40 to 50 years in the projects, said Joe King, assistant city manager for utilities.
With costs for electricity on the wholesale market rising, Danville officials think their city's future power costs will be "substantially less" - at least 10 percent - by purchasing power from plants the city invests in, King said.
"This is a permanent commitment as far as we're concerned," he said.
Two of the AMP-Ohio projects are coal-fired plants. One already is under construction in Illinois, and the other would be built in Ohio.
The third project involves hydroelectric plants that would be built on three dams that already exist in Ohio.
Martinsville would invest $3.5 million annually in the plants for 40 years, city officials have said. That equals $140 million.
Most of that money would be for power purchased from the plants, but a small amount would go toward debt service for the plants' construction, and the city would be a part-owner of the plants, according to Martinsville officials.
Martinsville would pay less than Danville because its electrical system is smaller, officials indicated.
Martinsville budgeted about $12.4 million this fiscal year to buy wholesale electricity. Danville is spending about $90 million a year on that commodity, King said.
Danville Utilities provides water, natural gas and electricity to about 48,000 customers in Danville, Pittsylvania County and small parts of Henry and Halifax counties, according to its Web site.
Its Power and Light Division serves about 41,000 customers in those areas.
In contrast, Martinsville has a city-operated electric department that provides electricity to about 8,000 customers in the city. The city supplies water through a separate department but does not supply natural gas.
When the AMP-Ohio plants begin operating in a few years, they will produce about 50 percent of Danville's power, King said.
If Martinsville participates in the plants, they would generate roughly 57 percent of the city's power, said city electric department Superintendent Dennis Bowles.
Danville City Council unanimously approved the power sales contracts with AMP-Ohio pertaining to the projects on Nov. 20, minutes from the meeting show.
King recalled that at public meetings, nobody expressed any opposition to Danville participating in the projects. He said he did not know if anyone had voiced concerns privately to members of either the city council or the city's appointed Utilities Commission.
Six people recently voiced opposition to participating in the projects during a Martinsville City Council public hearing. They expressed concerns about the environmental impact of the plants, and they wondered how any future laws enacted by the federal government for power plants would affect the city.
At least one resident indicated that new sources of energy developed in the future could be more efficient than coal and water.
King said Danville officials looked at environmental issues, especially those involving coal-fired plants. But in the foreseeable future, coal will remain the nation's most used source of energy, he said.
"Just relying on the wholesale market and hoping new technologies will come along ... is not a wise choice" in Danville officials' opinion, he said.
In deciding to invest in the power plant projects, King said, Danville relied upon advice from "a virtual army of consultants" with AMP-Ohio, the Blue Ridge Power Agency (a regional organization that Martinsville also is a member of) and independent consultants the city hired. All agreed that investing in the projects would be worthwhile for Danville, King indicated.
If new environmental protection laws eventually are enacted that require power plants to install new equipment, associated costs would be passed down to localities buying power from those plants, whether they own the plants or buy the power on the wholesale market, King said.
"It's one of those balancing acts," said King. "If you want to stabilize your rates (being paid for electricity), you've got to take some risk."�
And, it seems better to assume that risk with other localities, he said.
AMP-Ohio expects about 85 member localities to participate in the power plant projects, officials have said.
In addition to Danville, Bedford and Richlands also have agreed to take part in the projects, Bowles said.