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Friday, December 9th, 2011

Celina owes $2.38M for scrapped coal plant

Council committee recommends paying debt over 15 years

By William Kincaid
CELINA - The city owes $2.38 million for sunken costs related to the cancelled construction of a coal-fired power plant in Meigs County it committed to a few years ago.
Celina Planning and Community Development Director Kent Bryan made the announcement on Thursday night at a utilities committee meeting.
Committee members June Scott, Ed Jeffries and Myron Buxton will recommend to council that the city pay the multi-million dollar debt back over 15 years instead of opting to pay a lump sum.
Known as AMPGS, the project was ultimately scrapped by AMP board of trustees and the 81 participating AMP members because of escalating costs. According to mayor-elect Jeff Hazel, who attended the meeting, the estimated cost of a megawatt jumped from initial projections in the $40 range to more than $80, sealing the project's demise.
Celina city officials in the past have said AMP spent $144 million on the estimated $3-4 billion coal plant before scrapping plans.
"The economics didn't make any sense," Bryan said, pointing out the city is now left with a bill for work done before the project's cancellation.
That bill would have been almost $700,000 more if the city wouldn't have committed in July to purchasing electricity from a natural gas-fired generation plant in Fremont being operated by AMP.
"Based on the AMP board decision and concurrence of the AMPGS participants, the AMP board decided to add a development fee of approximately $35 million to the Fremont Energy Campus," AMP President Marc Gerken wrote in a memo to the city. "This development fee has been utilized to reduce the development cost associated with the AMPGS project for those AMPGS participants that also participated in the (Fremont) project."
Therefore Celina's debt on the AMPGS project dropped from $3.077 million to $2.386 million, according to the memo.
Council members on Thursday learned the city's debt, if paid back over 15 years with an interest rate of 3 percent, would cost about $199,987 a year.
"Based on AMP's current load forecast for the city, this would equate to an adder of 89 cents per megawatt hour to your power supply invoice," Gerken wrote in the memo.
Bryan said litigation between AMP and the plant contractor is ongoing - about a year in - and its eventual outcome could affect the city's required payment.
The city could make a few annual payments and wait to see how the litigation ends, he said.
He said the city could afford to make a one-time lump payment through its electric fund, which has a balance of $5.5 million, but if something such as a bad ice storm would occur, the account could take a hit.
Even though the city owes $2.38 million, it would have spent even more money if the plant had been constructed and produced electricity for Celina at a rate far exceeding electricity bought on the open market, Bryan said.
The AMPGS sunken costs will be paid through the electric fund.
Bryan said Celina and the other 80 AMP communities that committed to the cancelled project still own 11,000 acres of land in Meigs County where the plant would have been constructed. That location could possibly house a natural gas plant some day, he said.
St. Marys city officials learned this week that the city, which also committed to the AMPGS project, will be billed $2.7 million.
St. Marys electric superintendent Jerry Wolfe recommended paying the lump sum upfront using money from the electric fund, which has a balance of more than $6.5 million.
"We'll still have about $4 million left in the fund if anything comes up," Wolfe said.
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