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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Sunday, December 13, 2009
By GINNY WRAY - Bulletin Staff Writer
It could be January or even the middle of 2010 before Martinsville knows how much money it has lost, if any, on the electric plant project that has been scrapped, according to a city official.
That is because development of the $3.2 billion Meigs County, Ohio, coal-fired electricity generating station was an active project when it was stopped, according to city Public Information Officer Scott Coleman.
“There may have been some contracts that were executed and partially executed. It takes time to figure out who owes what. We might have a figure in January. It could take longer than that,” Coleman said Friday.
In late November, American Municipal Power (AMP) abandoned plans to build the station because contractors’ cost estimates had risen about 37 percent. AMP had spent about $200 million on developing the plant, and Martinsville’s prorated share has been estimated at $2.08 million.
According to the city, the contractors have been unable to adequately explain why the cost estimates have risen.
As a result, Coleman said AMP may seek legal action against the primary contractor to get a definitive answer on the costs, account for the money and possibly recover some of the money. He added that he did not know what the city’s share of legal expenses would be if a suit was filed.
“We will be in close contact as it progresses,” he said.
Martinsville buys wholesale power from AMP and resells it to city electric department customers. Of the roughly $14 million the city spends to buy power each year, 95 percent is from AMP, Coleman said. It buys about 2.5 percent of its power through the Southeastern Power Association (SEPA) and generates about 2.5 percent at its hydro plant south of the city, he added.
Two years ago, city council agreed to invest in three AMP projects — including Meigs County — in an effort to hold down electric costs in the future.
All but the Meigs County project are proceeding as expected, Coleman said. Those projects are smaller and have fewer variables so the costs are more fixed, he said.
Also, he said, with those projects the city is agreeing to purchase a certain amount of electricity over time, not invest in construction or infrastructure as it did with the Meigs County project.
Coleman has said the city has two options now:
• Withdrawal from its commitment to buy the power that the Meigs County 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.
• Participate 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.
If the Meigs County site is retooled, Coleman said Friday it would be with a different contractor.
“AMP is hoping, if it’s feasible, it may do something with that site so not all the work that has been done was for naught,” he said.
The city hopes to get a proposal from AMP in January on another project in which the city might participate. The council will hold a public hearing before making any decision, Coleman said.
Until council decides whether to proceed or withdraw, it technically has not lost any money, he added.
“That’s one reason why we can’t give a definitive answer” on how much it might be out on the project, he said. “The only way we would have lost anything would be to entirely cut our ties to this project. We still would have to pay, but it would be spread out over a long period of time.
“What we may do is reinvest in whatever project will be created with the remnants of Meigs County, and with a new model, it could be a lower-cost project than Meigs County was,” he said. “If you look at that possibility ... it could be that the city would save money or break even.”
Coleman added that the city is looking at this as a long-term decision.
“We have to provide a certain amount of power” and want to do it at the lowest cost possible. “I’m not saying $2.08 million is small, but in the grand scheme of things,” it is a small percentage of the $14 million the city spends a year to buy electricity, he said. |
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