Bond issue to buy gas power plant proposed for ballot

Water and Light director says $49.5 million measure would boost capacity, save money
Tuesday, January 4, 2011 | 6:44 p.m. CST; updated 6:58 p.m. CST, Tuesday, January 4, 2011

COLUMBIA — A $49.5 million bond issue that would finance a city purchase of the outstanding share of the Columbia Energy Center, a natural-gas turbine power plant, will appear on the April 5 ballot if the City Council approves on Jan. 18.

Rather than forcing a rate hike to customers now, the bond issue would enable Columbia Water and Light Department to spread over 25 years the cost of purchasing the facility, Water and Light Director Tad Johnsen said during a council work session Monday evening.

"Future ratepayers will be helping to pay for the expense of this generation station," Johnsen said.

The Columbia Energy Center gives the city extra energy capacity during peak demand. Ameren Energy Marketing built it in 2001 on Water and Light property, and it is connected to the Bolstad Substation in northeast Columbia. It has a 108-megawatt capacity.

"We have to be able to prove to the outside world that we can handle our load and a little extra," Johnsen said.

The advantage of the proposal, Johnsen said, is the low cost per month to maintain the extra capacity. He noted that the actual cost of producing the energy varies with the price of natural gas.

Less than 10 percent of the energy consumed in Columbia is produced locally, Water and Light spokeswoman Connie Kacprowicz said.

"Having local generation you can use at any time helps with reliability but also helps when we make purchases of energy," Kacprowicz said. "If something happens to a big power plant you rely on, it's a backup source of energy on the grid."

Water and Light already owns a 25 percent share of the natural-gas-fired generation facility. Ameren Energy Marketing owns the rest, and the city leases additional capacity based on a contract that runs through 2014.

Ameren Energy Marketing came to Columbia with the offer to sell its share of the facility. The full purchase of the power plant in one transaction would be the best financial option, Johnsen explained.

"We estimate we'll save about $1 million a year to bond this out," Johnsen said.

An alternative plan to purchase the plant in increments would require the city to continue to lease additional capacity under current contracts, incurring additional costs of $23.5 million. And it would still require bond financing in addition to the cost of outstanding lease agreements with Ameren Energy Marketing.

Bonding for the full ownership option would create an annual principal and interest expense estimated at $3.5 million and would release the city from the lease contracts through 2014. In comparison, under the status quo, the fiscal 2011 capacity lease charges will be $5.8 million and will increase 2.5 percent annually.

In addition to saving money annually, converting current capacity leases to ownership creates greater long-term cost stabilization, Johnsen said.

"Load demand is always vertical; someday we are going to have to buy more," he said. "I have every expectation that in eight years, it's not going to be at this price."

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Paul Allaire January 5, 2011 | 9:35 a.m.

It sounds like a no brainer to me. I mean, we're already using it anyway. Why rent?

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