ESCANABA - A May 6 ballot question to dispose of Escanaba's power plant is a contingency plan in the event the sale of the facility does not take place, explained city officials who stress the sale remains the number one priority.
"Our priority plan is to sell the power plant," said City Manager Jim O'Toole during a townhall meeting held Thursday to explain the upcoming ballot referendum. The same message was also discussed at council's regular meeting which followed the townhall session.
Escanaba Green Energy (EGE) has been negotiating with the city for more than two years to buy the coal-fueled power plant to convert it to burn biomass. The deal is nearing closure as EGE's financing is finally materializing after several delays in the process to secure the $36.5 million needed to buy the plant and pay for the biomass conversion.
EGE is buying the facility and 17 acres of land for $4.4 million which includes $2 million the city will retain if the company decides to back out of the deal after the sale.
EGE President Charles Detiege clarified at both the townhall and council meetings that the May 6 referendum has nothing to do with the company purchasing the plant. If the sale is not finalized by then, EGE will continue the process to close the deal after the election date.
O'Toole explained that once the city has EGE's money in hand with no restrictions, the deal is ready to go.
"Our first option is to sell the power plant for continued operations but we do need to respond accordingly should the deal not go through," said O'Toole.
Until the sale is a done deal, Escanaba will continue to purchase 100 percent of its energy from NextEra, a Florida company which has been suppling power to the city since Jan. 1, 2012, said O'Toole.
"We have a very attractive power purchase agreement with NextEra," he commented.
If the power plant sale does not go through and voter approval is granted for council to dispose of the plant, operations would continue as long as operational costs are being paid for by the Midwest Independent Transmission System Operator, Inc. (MISO), an interconnection agency, said O'Toole. He added the plant and property would also continue to be for sale.
Electric Superintendent Mike Furmanski stated during the townhall meeting that currently no rate increases are slated for electric customers as long as MISO continues to pay the city $125,000 a month to keep the facility operational and available to the power market.
"The (MISO) agreement will be terminated at some point," he noted.
The MISO funding is expected to possibly last until the summer of 2016 but the agency could terminate its agreement with a 90-day notice at any time, he said.
If the plant sale does not take place and if MISO stops reimbursing the city to keep the plant operational and available on the power grid, Furmanski outlined options for the city.
The plant could be idled with a reduced staff and a 12 percent rate increase for customers. No vote would be needed but MISO would have to approve to idle the plant.
If the plant is operated with a full staff at a cost to the city of $375,000 a month, customers could see a 35 percent rate increase, said Furmanski. No vote and no MISO approval would be needed.
If the plant is retired, there would be zero costs for staff or operations. The referendum vote is needed to retire the plant and MISO approval is also required, he said. The city would continue to buy energy from a power supplier.
Without the vote to retire the plant, the city would have to wait as MISO decides to consider the plant's retirement, costing the city $125,000 month, Furmanski added.
"Our best option is to sell the plant," he said. "The (next) best option would be to seek retirement."
O'Toole added, "Right now we have the authority to continue plant operations but we don't have the authority to tear it down."
According to a study to scrap the building, demolition costs would be $2.4 million while scrap sales would be about $1.8 million.
"We feel we need to have the authority to dispose of the power plant should the (EGE) deal not transpire," said O'Toole. "We want to respond immediately."
Escanaba is selling the plant because it is less expensive for the city to purchase power compared to generating electricity by burning coal.
- - -
Jenny Lancour, (906) 786-2021, ext. 143, firstname.lastname@example.org