December 9, 2010

Opening of Region's Newest Power Plants Expected to Stabilize Municipal Electric Rates

While an apple a day may keep the doctor away, Memphis area residents are hoping a plum will help keep the electric rate increases at bay. It's not the fruit variety, but Plum Point Generating Station, in which utility customers are placing their hopes.

Members of the Missouri Joint Municipal Electric Utility Commission (MJMEUC) as well as the Missouri Public Energy Pool #1 (MoPEP) are involved with the project.

The city of Memphis is one of the 35 members of MoPEP, which has contracted to purchase 50 MW of capacity from the plant annually, or approximately 17% of the group's over-all use. MJMEUC owns a 22% share of Plum Point, with members North Little Rock, Osceola and Piggot, AR; as well as Carthage, Lennett, Malden and Popular Bluff, MO who contracted to receive that share of power.

"An ownership interest would be expected to provide slightly lower cost, but there are some trade-offs in terms of risk," said Duncan Kincheloe, General Manager and CEO of Missouri Public Utility Alliance which includes MoPEP. "For example, if the plant had not been able to achieve successful construction and wasn't capable of generating any electricity, there would be no cost to MoPEP although those with ownership interest would still be responsible for costs of the attempted construction."

Fortunately for the stakeholders as well as the contract purchasers, the plant is up and running. The new 665-megawatt rated generating unit built in Osceola, AR, was officially declared in service this fall.

While it is hundreds of miles south of Memphis, local electric customers are expected to reap some of the benefits.

"Replacing market based power purchase agreements with cost based assets, like Plum Point, will provide cost reductions and long term stability for MoPEP," said senior engineer and MoPEP project manager Vern Kincheloe.

Plant construction began back in 2005, with the first firing occurring in late March of this year.

The Missouri Public Service Commission determined the Plum Point power plant was fully operational and used for service before August 15, 2010.

"The Commission is pleased that the state-of-the-art Plum Point power plant is now providing service to Empire's customers," said PSC Chairman Robert M. Clayton III. "This facility has the most advanced equipment available to meet all required environmental regulations."

Kincheloe agreed, describing the plant as "utilizing proven, pulverized coal boiler technology along with advanced emission controls," in the September 2010 The Alliance Advantage newsletter for the two Missouri municipal power entities. "Plum Point is one of the cleanest coal-fired plants in the U.S."

A smaller chunk of MoPEP's power supply was expected to come online this week when the switch is officially thrown on the new Iatan II power plant.

Kansas City Power & Light Company and KCP&L Greater Missouri Operations Company (formerly Aquila), subsidiaries of Great Plains Energy Incorporated completed in-service testing on August 26, 2010 at the new 850 megawatt power plant located in northern Platte County.

The plant, which includes state-of-the-art environmental equipment, was the largest construction project in the state of Missouri over the last five years, according to Bill Downey, president and chief operating officer of KCP&L.

Duncan Kincheloe stated that MJMEUC owns an approximate 11% share in the new plant, the equivalent of 100MW. Of that amount 50MW is contracted to the City of Independence Power and Light, 20 MW to Columbia and 30 MW to MoPEP.

The first generating unit at the new Prairie State power plant near Marissa, IL, is expected to come online by the end of 2011. MJMEUC owns a 12% interest in the 1600MW plant that will consist of two units. Kincheloe indicated that MoPEP has contracted for 82MW with the remainder of the group's interest being contracted to Columbia (50MW), Kirkwood (25), Hannibal (20), Fulton (10), Marceline (4), Kahoka (2) and Centralia (2).

"We are generally replacing other power supply sources that tended to have higher and less predictable long run costs," said Kincheloe of the MoPEP power purchase contracts with the new plants. "We expect MoPEP costs to be relatively stable over the next few years as compared to the rate increases being experienced by other Missouri utilities. We have already experienced significant savings from the recession's impact on wholesale electric costs so the remaining effect of the new plants is going to be to keep our costs more stable now instead of being able to produce savings below the current levels."

Kincheloe indicated that the group has advised MoPEP members utilities that 2011 costs will be lower than originally forecast for 2010, but likely will not be as low as the actual 2010 costs were as the economy is expected to rebound resulting in expanding demand.

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