Waiting all my life for the Plain Dealer to finally catch up.
Better late than never?
Now if only the News-Herald would do a story? Maybe if we throw in some chickens and pit bulls?
The most interesting parts of all these articles is how the people that got their communities involved still believe it's a great deal. Then again what else could they say?
Cleveland Public Power's contract with Illinois coal plant could mean higher rates for customers
Published: Wednesday, September 05, 2012, 6:00 AM
By Leila Atassi, The Plain Dealer The Plain Dealer
CLEVELAND, Ohio -- Five years ago, Cleveland city officials embraced a plan to build a coal-fired power plant in southern Illinois in the hopes that owning a portion of the facility would help city-owned Cleveland Public Power control the cost of electricity for its customers in a mercurial market.
So far, however, the plant has failed to live up to its billing.
City officials confirmed in an interview last week, that from March through May, CPP paid a total of $753,000 though it received no electricity because the plant was inoperative and experiencing technical problems. And in the plant’s first year, CPP will pay a rate 42 percent higher than the market price, though CPP’s original sales pitch to City Council and the public predicted the plant’s rates wouldn’t hit those rates until 2025.
Critics of CPP’s agreement to become part-owners of the Prairie State Energy Campus argue that the utility has learned nothing from its earlier investment in a failed power plant project in southeastern Ohio — a debacle for which the city of Cleveland owes about $8 million, though nary a smokestack was built on the site.
City officials minimize the effect of that project on CPP’s overall business, and contend the long-term benefits of owning a share in Prairie State outweigh the recent setbacks. But critics warn the Prairie State deal comes with other problems that could subject CPP customers to rates so high that they abandon the city-owned utility.
Plans for Prairie State were conceived in 2001 by Peabody Energy Corp., the nation’s largest coal producer, which also owned a nearby mine with a 30-year supply of coal and ash landfill. But in 2007, Peabody aimed to entice public power agencies throughout the Midwest to help finance the project in exchange for shares in ownership of the plant, mine and landfill.
More than 200 communities signed on. They agreed to buy energy from the plant for decades on the promises that it would provide low-cost energy and that the cities that own it could control costs while profiting by selling excess cheap power on the market.
A CPP presentation before Cleveland City Council in October 2007 projected savings for decades to come, with the cost of power as low as 72 percent of the market rate. And Cleveland, along with other cities represented by the American Municipal Power consortium, entered into a 50-year contract to purchase energy.
Meanwhile, dozens of proposed coal plants nationwide were canceled due to the increased cost of construction and tough new environmental standards.
Nearly 60 plants were cancelled in 2007 alone, reported ION Consulting. CPP hired the Denver-based firm in 2008 to evaluate plans for another AMP-initiated coal-fired power plant — this one in Meigs County, Ohio.
The firm cautioned in its report that “there has never been a more difficult time to get a coal plant built due to the current degree of uncertainty.”
Intensified community opposition and environmental concerns, increases in construction costs and ever-changing technologies to control harmful emissions has made coal-fired power plants a dicey venture for most public utilities, the report stated.
For CPP, which competes with the Cleveland Electric Illuminating Co., the risk could be even greater. If higher rates drive away CPP customers, rates would run even higher for those who remain with the utility, causing a chain reaction of lost business, ION noted.
"This could quickly lead to the ‘death spiral’ most utilities feared would come from deregulation in the 1990’s,” the report warned.
ION went on to note that lenders will only finance such a risky project if the participating communities and utilities sign long-term power purchase agreements that require them to pay, whether or not they receive the low-cost power they bargained for.
Despite the warnings, CPP agreed to the “take-or-pay” contract. And as ION prophesied, after several years of protests from environmentalists and a spike in the price of the project to nearly $4 billion, AMP aborted the coal plant altogether in 2009.
Cleveland was responsible for $13 million in “stranded costs” to cover plans for a facility that was never built. Agreeing to participate in another AMP-driven deal to build a natural gas plant in Fremont whittled that cost to about $8 million last year, which would be split between customers and a construction-debt fund.
Meanwhile, the Prairie State project forged ahead, too.
Costly setbacks at Illinois coal plant
To safeguard against ever-growing construction costs, AMP and the other public utilities involved — representing 2.5 million people in nine states — amended their contracts in 2010 so they would pay a $4 billion fixed cost for construction. By then, however, the project already had cost them a billion dollars more than was estimated in 2008.
Then, the plant experienced a costly machinery malfunction that delayed its scheduled grand opening in March. As the plant struggled to ramp up its electricity production to its promised output, Cleveland and other Midwestern cities, again locked into “take-or-pay” contracts, were obligated to pay the facility’s operating costs — whether or not it produced any electricity.
A report published last week by the Institute for Energy Economics & Financial Analysis estimated that, all told, CPP’s contract to buy 24.88 megawatts of power a year for the next five decades will, by 2025, end up costing the city of Cleveland $19 million dollars more than the market price for energy.
Other complications could create further expenses.
The adjacent coal mine was cited by the federal government for digging too far beyond the mine’s permanent supports. The Federal Mine Safety and Health Review Commission typically permits mining operations to cut side channels that extend up to 20 feet past the supported main artery. Sometimes the rock composition is too unstable for even that distance without reinforcement, reports the National Institute for Occupational Safety and Health.
Mine operators at the Prairie State Energy Campus planned on extending their cuts to 40 feet beyond supports.
Federal regulators rejected that plan. Not only could an unstable passage collapse, but methane and particles released into the air could be hazardous to the health of miners without proper ventilation, regulators noted.
The commission ruled that the mine should first test the stability and conditions of the 20-foot distance before applying for a permit to dig further.
Prairie State contested that decision and lost. According to the commission’s website, an appeal has been pending since 2010.
But R.W. Beck, an engineering consultant hired by AMP to evaluate the Prairie State project, determined that if the mine is too unstable to withstand extended cuts, or if the commission does not permit them, it could come up far short of its promised 30-year coal supply.
Also the firm concluded that unforeseen obstructions and site conditions at the ash landfill would reduce its capacity from the 23 years Peabody promised to about 12 years. The firm predicted that the plant’s owners will be forced to find new coal sources and disposal sites, while continuing to pay the debt on the old.
Cleveland city officials defend investment in coal
In an interview last week, Jason Wood, communications chief for the city’s Public Utilities Department, minimized the effect the Prairie State deal would have on CPP’s customers. Although CPP relies predominantly on coal for its energy, he said, Cleveland’s share of electricity from Prairie State represents only eight percent of CPP’s peak demand and 15 percent of its base needs.
That’s a negligible portion of the utility’s energy portfolio, which also consists of power drawn from the Fremont natural gas plant and some hydro-powered energy generation stations, Wood said.
He conceded that CPP did pay for three months of operating costs though it received no electricity from the Prairie State plant. But he said that cost, when passed on to the utility’s 75,000 customers, amounted to 98 cents per account.
Wood said that the IEFFA’s projection on the long-term cost to communities is alarmist and based on speculation. He defended CPP’s agreement to the 50-year contract, contending that communities that take an ownership stake in the project will have the power to control the cost, rather than rely on a volatile market easily effected by the laws of supply and demand and the availability of other fuel sources.
Sandy Buchanan, executive director of Ohio Citizen Action, said the plant has become a “financial and environmental nightmare,” and Cleveland and the other cities that committed to it in search of cheap electricity are now the de facto owners.
CPP and AMP have entered one bad deal after another to the detriment of their customers, she said.
“Cleveland Public Power’s ratepayers are finding themselves on the hook for two financially disastrous coal plant deals despite the warnings from citizens and financial experts that the costs of these plants could spin out of control,” Buchanan said.
