Martinsville Bulletin, Inc.
P. O. Box 3711
204 Broad Street
Martinsville, Virginia 24115
276-638-8801
Toll Free: 800-234-6575
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Thursday, November 26, 2009
By MICKEY POWELL - Bulletin Staff Writer
Higher-than-expected costs are prompting American Municipal Power (AMP) to abandon plans to build a coal-fired electricity generating station in Ohio — a station in which the city of Martinsville has invested.
Scott Coleman, the city’s public information officer, said AMP’s decision will have no immediate impact on Martinsville Electric Department customers. Rates will not increase, and the city will incur no liability, he said.
He could not, however, say how much money the city has invested in the project and whether it will recoup any of it.
AMP member localities, including Martinsville, who invested in the project in Meigs County, Ohio, voted overwhelmingly Tuesday to terminate the project in its developmental stages.
Coleman said Wednesday the station was “far from being completed.” He was unable to be more specific.
The decision was made due to a roughly 37 percent increase in contractors’ cost estimates for the project in the past six months, as well as contractors not being able to explain the reasons adequately, a city release said.
The cost increases, coupled with softening short-term market prices for electricity due to the national recession, no longer made the project an economically desirable option, according to the release.
Based in Columbus, Ohio, AMP is a nonprofit organization owned by member localities. Through AMP, Martinsville buys wholesale electricity that it sells to local homes and businesses.
Despite opposition from city residents, Martinsville City Council in early 2008 entered into an agreement to buy wholesale power from three AMP projects in Illinois and Ohio — including the Meigs County project — for 40 years.
The other projects remain under development, Coleman said.
Due to the recession, he said, today’s power market is one in which “you can purchase power much cheaper than you could two years ago.”
Back then, the price of wholesale power typically fluctuated between $65 and $70 per megawatt hour, he said. Today, the price typically fluctuates between $25 and $30 per megawatt hour, he added.
A watt is a unit used to measure power consumption. A megawatt equals one million watts.
Due to the lower price today, the need to build the Meigs County plant has lessened, Coleman indicated.
However, Martinsville officials think it remains in the city’s best interests to own, or at least be part owner of, power generation facilities as opposed to being captive to volatile market rates, said City Manager Clarence Monday.
“The sole alternative,” he said, is for the city electric department to shut down and city residents “become customers of American Electric Power, a for-profit business” that is planning a 17 percent rate increase.
AMP aims to replace power that would have been produced at the Meigs County station with purchases on the open market until 2020. Replacement power beyond that year could be obtained by developing other generation projects as well as further market purchases, the release said.
AMP so far has spent about $200 million on the development of the Meigs County station. Martinsville’s prorated share is estimated at $2.08 million.
City offices were closed Wednesday afternoon for the Thanksgiving holiday, and officials did not have access to figures showing how much of that share, if any, has been paid.
Now that the Meigs County project has been abandoned, Coleman said the city has two options:
• A complete withdrawal from its commitment to buy the power that the project would have generated. In that case, the $2.08 million, or what is left of it to pay, would be paid to AMP over a 10- to 15-year period through the city’s cost for purchased power, he said.
• Participation in future AMP projects. That might include retooling of the Meigs County site for natural gas power generation, additional hydroelectric projects on the Ohio River and/or a proposed natural gas power generation facility in Danville, he said.
Under the latter option, the city’s costs toward the Meigs County station’s development would be rolled into the new portfolio, Coleman said. And, that option should have no effect on city residents’ monthly power bills, he said.
The city council will have to select one of the options. But council members “will need time” to think about which is best for Martinsville, Coleman said. Therefore, he could not say how soon a decision will be made.
City staff favors the latter option, he said, because the other one likely would mean a rate hike for electric customers because the city would owe AMP money.
AMP is considering legal action against contractors involved with the Meigs County project, Coleman said. If that happens and AMP recovers any money, the city might get back some of its costs toward the project, he said.
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