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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Tuesday, December 1, 2009
By MICKEY POWELL - Bulletin Staff Writer
Martinsville should consider taking part in other American Municipal Power (AMP) projects now that a coal-fired electricity generating plant will not be built, a majority of city council members say.
However, although he agrees that other projects could be considered, Councilman Danny Turner said the city might be able to buy power long-term on the wholesale market for less cost, now that prices have fallen.
Last week, Martinsville and other AMP member localities ceased the Meigs County, Ohio, coal plant project due to a roughly 37 percent hike in contractors’ cost estimates during the past six months.
AMP already has spent approximately $200 million on developing the plant, and Martinsville’s prorated share has been estimated at $2.08 million.
City officials say Martinsville has two options, one of which is fully pulling out of its commitment to buy power that the plant would have produced. The city would pay AMP the $2.08 million, or what it has not paid already, over a 10- to 15-year period through the city’s costs for purchased power.
Martinsville buys wholesale power from AMP that it sells to customers of the city electric department. Dennis Bowles, superintendent of the department, and City Manager Clarence Monday said they have not been able to determine if any city money has been put toward the project yet.
The other option is to participate in future AMP projects. Potential projects include retooling the Meigs County site to generate electricity by natural gas, additional hydroelectric projects on the Ohio River and/or a proposed natural gas power generation facility in Danville, officials have said.
Despite city residents’ opposition, Martinsville City Council last year 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 continue to be developed.
If the latter option is chosen, “the city doesn’t have to come up with $2.08 million at all” to pay back AMP, Monday emphasized. “We can roll that (sum) into our purchased power costs from a new” project that would be chosen.
Because the first option could mean a rate hike for city electric customers, “it is not the prudent thing to do,” said Monday. “The prudent thing would be to go after a cheaper model (way to generate electricity). I think that’s the decision the citizens would want us to make.”
In about a month, AMP is to have some potential strategies toward the latter option ready for city officials to consider, Monday said.
Mayor Kathy Lawson and Councilmen Mark Stroud and Gene Teague said they favor taking a look at those strategies.
“I feel certain” that those strategies “will be a better alternative” than a coal-fired plant because power sources such as natural gas and water are “lower cost energy sources” that might save money, Lawson said. Stroud mentioned that the commitment to AMP was made before he was elected to the council in May 2008.
Because that commitment has been made and Appalachian Power (APCo) — which serves customers in Henry County — recently raised rates and aims to do so again, he said, looking at other AMP options is “probably the proper thing to do right now.”
Still, “I’d rather opt for a shorter term agreement” than a commitment of four decades or more, Stroud said.
As alternative energy sources are further developed and used more, those sources will become cheaper, and Martinsville should be able to look at them, he indicated.
Teague said pulling out of the city’s commitment to buy power the plant would have produced would “be like building part of a house, then paying the money and then walking away from it” when you still need a place to live.
Martinsville’s strategy for buying electricity is “supposed to be a diversified strategy” that involves a variety of sources, possibly gas or “something that we don’t know about yet” that may not have been developed, he said.
And, if Martinsville was to get out of the power business and APCo started providing electricity in the city, “our citizens are going to have to pay more” for service, said Teague.
So “I can’t think of a good reason why” the city would not explore other options with AMP, he added.
Turner said, though, that due to the recession, the city might be able to negotiate electricity contracts on the wholesale market for cheaper prices than could have been negotiated in the past.
“You can buy electricity now on the open market for a third of what you could get it a year ago,” he said.
City officials have said their decision to buy wholesale power through AMP was largely based on volatility in the market.
According to city spokesman Scott Coleman, two years ago the price of wholesale power typically fluctuated between $65 and $70 per megawatt hour, whereas today’s price typically fluctuates between $25 and $30 per megawatt hour. Yet officials have voiced concern that prices could rise sharply in the future.
“I have no problem” with the city buying electricity through AMP, Turner said, and “we’re too far down the road to pull out” of agreements already signed.
He said that if wholesale prices escalate again, there could be “a purpose” for the city being part owner of a power plant.
In a statement sent to other council members and the media Monday night, Turner said he will ask Clarence Monday and Bowles for any correspondence or written materials given to AMP members during the organization’s Nov. 24 meeting at which the decision to cease the Meigs County project was made.
He said he also seeks a breakdown of costs, reflecting both money already spent and not spent, for that project that Martinsville might have to repay.
“I haven’t seen any actual accounting of the breakdown of the $200 million figure that is floating around,” he said in the statement, referring to money AMP has spent so far toward developing the project.
He added that he also wants to see “in writing” alternatives AMP proposes to Martinsville.
Vice Mayor Kimble Reynolds Jr. could not be reached for comment. |
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