Escanaba ponders power plant sale

ESCANABA – The Escanaba City Council discussed the possibility of a referendum to close the Escanaba power plant during a budget meeting Monday.

The city’s electric fund, which supports day-to-day electrical operations, has a $13.1 million budget for the 2013-14 fiscal year. This is a 3.5 percent decrease from the current fiscal year’s budget. Under the proposed budget, there will be no changes to the rates paid by electrical customers.

While the city electric fund net assets exceed $23 million – with a cash balance of about $10 million – concerns were raised the operating income could be insufficient if the sale of the Escanaba power plant to Escanaba Green Energy fails and Midwest Independent Transmission System Operator Inc. decides not to renew a contract with the city.

Under the MISO contract, the city is paid to keep the power plant on standby and provide power to the grid when needed.

“We’re working on two assumptions, either the plant sells or we get a new (contract). If either of those were to fall through, then the next step would be to bring a referendum to the people to shut the plant down in November,” City Controller Michael Dewar said.

To have the question appear on the November ballot, the wording would need to be submitted by Aug. 13 and be approved by Aug. 27.

The current MISO agreement expires in June. While contact has been made with MISO, negotiations have not yet begun for a 2013-14 contract.

“Worst-case scenario, if we’re faced with that decision (to have a referendum), we’re probably looking at November. If we didn’t get the MISO (contract) and the plant didn’t sell in that period of time we could sustain some really serious costs,”Councilman Walter Baker said.

While no rate increases are planned, if the city were to take a financial hit due to the failed power plant sale and loss of the MISO contract, the city would either use existing funds to absorb the cost or would pass the cost on to customers through a rate increase.

“At the end of the day, this budget is about setting the rates, and you certainly don’t want to increase the rates working under the assumption that … the least favorable of three alternatives takes place,” Dewar said.

Under Escanaba’s rate ordinance, the city would need to increase the rate by June – something that could be difficult if the plant sale or MISO agreement are delayed.

“Our hope is that EGE will come in earlier … than what they’re indicating,” City Manager Jim O’Toole said.