Pharos-Tribune

January 25, 2013

Power plant negotiations moving forward

LMU, City Council meet with consultants to evaluate proposals

by Mitchell Kirk
Pharos-Tribune

INDIANAPOLIS — After the Jan. 11 deadline for contractors to submit proposals to develop the new Logansport Municipal Utilities power plant, the team of consultants the city hired to evaluate the proposals has been doing just that.

On Thursday, Mayor Ted Franklin, LMU Superintendent Paul Hartman, members of the LMU board and members of City Council met in Indianapolis with the consultants to discuss the proposals.

As it was an executive session being held before any official decisions are made, those involved in the meeting were reluctant to discuss specific details.

Part of the purpose of the meetings, Hartman and Franklin said, was to hash out details in the findings of the team of consultants to bring LMU and the city up to speed. The consultants, a group of about 20, specialize in areas like engineering, utilities, environmental regulations, power generation, law and economics, among others.

“The team was posing questions and we’re getting some answers back,” Hartman said. “We’re just in the process of rooting out which way the best way to go is. We’ve been involved with the team for a couple weeks now. As far as reviewing the vendors, we’ve been involved with that for a few meetings, but now we’re starting to share that with the board and the council.”

The finer details

Franklin added that another purpose of the meetings was to work out the finer details of the project as well.

“There’s no reason for the council to have every minute detail about a construction company that specializes in concrete,” he said. “All we know is, we need concrete to be 14 inches thick and hold 80,000 tons. So that’s part of what this team is doing, is sorting these things out.”

Project manager Alvaro Almuina said that members of the LMU board and City Council were invited so that they would be prepared as the project moved forward.

Councilman Bob Bishop attended the meeting and said he found it very informative.

He emphasized the need to revamp LMU, as a disregard for such measures would lead to higher electric rates.

“Now we’re looking at a situation where we can lower rates and not increase them,” he said. “It seems like a win-win.”

Councilman Charlie Hastings agreed.

Six proposals were submitted by the deadline on Jan. 11. They came from Green USA Recycling, Huston Electric Inc., S.G. Preston Company, Pyrolyzer LLC, Waste Management and Archaeological Consultants of Ossian.

As far as addressing the actual evaluation process of the proposals and what to expect going forward, all Almuina could say was, “a second set of interviews were set up with a shorter list of candidates.”

Burning trash pellets

The new plant will be powered by refuse-derived fuel pellets, a relatively new development in the energy industry that is used mostly in Canada and Europe. The desire to develop such a plant, Hartman said, stemmed from higher demand for power in the area along with environmental regulations driving up the costs of burning coal.

Because LMU is not able to comply with the new environmental regulations, it has had to buy electricity from Duke Energy to supply local demand at a cost of 8.5 cents per kilowatt hour. To establish more competitive rates, the request for proposals issued by the city stipulates that the new plant must generate electricity at a cost of no more than 5.5 cents per kilowatt hour.

The plant is estimated to cost around $600 million. According to a report titled “Affordable Energy Production from Renewable Fuel,” issued in November by William-Lynn-James, Inc., one of the consulting firms hired to assist with the project, the preferred way to finance the project is through a public-private partnership, in which the vendor would pay for the development of the plant and then operate it for a period of time specified in an agreement before transferring it to LMU. The criteria for evaluating the proposals goes on to state the agreement should last no longer than 25 years.

Is risk the city’s?

One of the concerns is that tax money would have to be used to pay for the plant when it came time for the developer to transfer it to LMU.

As he has in the past, Almuina emphasized that the chosen proposal would place most of the risk on the vendor and not the city.

“There’s no requirement for financial investment [from the city],” Almuina said, adding that the incentive for the developers would be to earn money from the electricity the plant would sell before transferring it to LMU.

Almuina said that part of the evaluation process included assessing the financial standings of the bidders.

While it is stipulated that the plant must generate electricity at no greater than 5.5 cents per kilowatt hour, Mayor Franklin said that it was unrealistic to expect rates to stay that way for the long haul.

The consultants will make their recommendation to the LMU board on Jan. 27. With or without the board’s agreement, the consultants will give a presentation of their recommendation at the City Council meeting scheduled for Feb. 4 at 5 p.m. The earliest that the City Council could hold a final vote on the matter would be Feb. 14.

Mitchell Kirk is a staff reporter at the Pharos-Tribune. He can be reached at 574-732-5130 or mitchell.kirk@pharostribune.com.