October 7, 2013

LMU aims for millions in ratepayer savings

Plan includes reducing plant output and renegotiating coal contract.

by Mitchell Kirk Pharos-Tribune

---- — Logansport Municipal Utilities is working to decrease its generating plant’s output and renegotiate the agreement with its coal supplier in an effort to save ratepayers money.

LMU’s generating plant provides about 30 percent of the city’s power. The remainder is purchased wholesale from Duke Energy.

Saving ratepayers money can be accomplished by decreasing operational costs at the generating plant by running only one of its boilers at a time, Hartman said, adding that doing so would decrease the plant’s output by about 100 million kilowatt-hours a year.

Only using one boiler will force LMU to purchase more wholesale power from Duke Energy, but it will still be less than costs required for generating at the plant, especially after Duke finishes upgrades on its lines that will allow it to supply Logansport with more power, Hartman said.

“It’s why it makes sense to purchase as much as we can,” Hartman said.

More wholesale power and less plant generation means less coal will be required for LMU’s plant, and Paul Hartman said he is attempting to renegotiate the agreement with LMU’s coal provider to further decrease costs for ratepayers.

LMU’s $6 million contract for a minimum annual amount of 80,000 tons of coal with Peabody Energy out of Frankfort expires in December 2015.

Hartman wants to reduce the LMU’s minimum tonnage to 20,000, something he said Peabody has so far shown an unwillingness to do.

At a Logansport Utility Service Board meeting Tuesday, Hartman said he will be enlisting the help of Logansport City Attorney Randy Head in future negotiations with Peabody.

Hartman said LMU had attempted rate-reducing measures at the plant in the past by shaving off peak kilowatt-hours as much as possible. He said he is attempting this new strategy after concluding that halving the boiler plant’s output, cutting coal and purchasing more wholesale power would lead to larger savings.

“It’s a huge philosophical change in how we’re running the generating plant,” Hartman said.

Should LMU be successful in these pursuits, Hartman said it would all lead to about $2 million in ratepayer savings. He said he would have a better estimation on how it will affect individual bills in the future if and when a deal goes through.

Hartman said he will be updating the Utility Service Board at a meeting later this month and in November as far as negotiations are going.

Last month, the U.S. Environmental Protection Agency released a proposal in line with President Barack Obama’s Climate Action Plan to cut carbon pollution that would require all new power plants to adhere to stricter carbon dioxide emission limits.

A press release on the EPA’s website states its intention to propose standards for existing power plants by June 2014.

City officials have said tighter restrictions will force LMU’s generating plant to close. This expected closing and LMU’s attempt to improve the economic viability of its generating plant joins the timing of city officials’ efforts to secure a new generating plant in the city that would run on refuse-derived fuel. Officials estimate this plant, if approved by Logansport City Council, will be completed in 2017. LMU’s current coal-powered plant is expected to close in 2018.

Mitchell Kirk is a staff reporter at the Pharos-Tribune. He can be reached at 574-732-5130 or Follow him: @PharosMAK