CU, Empire officials weigh three-way partnership

There are more questions than answers right now regarding a three-way partnership for construction of a power plant expected to plug southwest Missouri into its future electric supply.

Officials with the three entities City Utilities, Joplin-based Empire District Electric Company and Omaha, Neb.-based Tenaska Inc. hope to have some answers this summer. Representatives are holding weekly conference calls to hash out the details.

Springfield's Board of Public Utilities opened the door when it voted May 27 to pull its original power plant proposal, Southwest Power Plant II, from the Aug. 5 ballot. Board and staff energies now are shifted to the intriguing three-way deal for a coal-fired, 600-megawatt generation plant proposed by Tenaska, a national independent power producer.

CU's initial plan for a 275-megawatt plant in southwest Springfield was projected to cost $532 million, $599 million when factoring in financing.

While CU's and Empire's interest in the new proposal is powered by potential customer savings, according to officials with the companies, there is no construction cost estimate at this time.

"That's one of the key points of this because the cost of it will drive what it ultimately means in terms of prices for our customers," said John Twitty, CU general manager and chief operating officer. "It is simply too early in the process yet."

Early negotiations also involve:

location;

customer savings; and

ownership share versus wholesale purchase.

According to Brad Beecher, Empire's vice president of energy supply, the front-running plan calls for split ownership between CU and Tenaska, with Empire buying output from Tenaska. But Twitty is not committed to that deal. He said it is possible CU may also enter a wholesale purchase agreement with Tenaska.

CU and board officials, along with an outside consultant, will analyze both scenarios to find the greatest cost savings.

"If it's an ownership share, I really don't see it very much different than what we were proposing in Southwest II," Twitty said. "On the other hand, if a power purchase contract looks attractive to us, that could be something that would not be too dissimilar to what we have today (with wholesale purchases)."

Twitty said CU has three external contracts to purchase electricity. Those contracts are with Grand River Dam Authority in Oklahoma, Kansas City Power & Light Co. and the federal government's Southwestern Power Administration.

The ball is in CU's court, said Tenaska's Bill Braudt, general manager of project development. "They get to tell us what they're going to do."

Twitty expects the outside study, which should not cost more than $100,000, to be complete by October. The consultant has not been named.

"We're going to do this right. If we can do it by October, that's great but if we need a little bit more time, we'll take it," he said.

Station site

The burning question is where to build. The site must have access to rail, water and electricity transmission lines.

Officials aren't disclosing potential sites for fear of creating a price war for the land. What they are saying is that there are four options: two parcels in southwest Missouri, one in southeast Kansas and one in northeast Oklahoma. Between 500 and 1,000 acres are needed.

"The (sites) getting serious consideration are the ones in Missouri," Beecher said.

If the Oklahoma or Kansas locations are selected, Twitty says it would cost Springfield some jobs.

CU's Southwest II proposal would have generated 30 new CU jobs and about 250 construction jobs on average during its three-year construction process. While a partnership would eliminate the long-term CU jobs, Twitty hopes the partnership plant would be in Missouri, making those jobs available to Springfield.

"You just have to balance that all in with all of the other issues and make the decision that you think is best for your customers," Twitty said.

Energy growth

Both CU and Empire have indicated a need for more energy within five to seven years. CU officials estimate the city will be short of power by 2008. Empire's timeline is 2010, when its contract with Western Resources Inc. of Topeka, Kan., expires.

"That's really our big driver that coal-fired purchase goes away and we'll need to replace it," Beecher said.

Empire recently added two gas units to its system, each producing 50 megawatts. Customer growth is nearly 2 percent per year, while projected total energy growth is 2.8 percent annually, according to Amy Bass, Empire's director of corporate communications.

CU's electric customer base has grown by about 1,400 customers each year, said Mark Viguet, senior manager of marketing and communications for CU. CU has 96,000 electric customers, and its energy consumption is projected to grow by 2.8 percent each year.

History

Empire has a short history of working with Tenaska. In the early 1990s, Empire turned down a Tenaska plant proposal. Beecher said it occasionally buys spot natural gas from Tenaska.

This would not be Empire's first partnership, but would be its only joint venture with a public entity.

If CU accepts Tenaska's ownership share offer, it would be the first such agreement for Tenaska.

"At this point in time, we don't have one where a municipal owns a part of the power plant itself, but it's the same type of discussion the same technical and legal issues," Braudt said.

"We're very comfortable with going forward with that."

Now CU officials will decide what is comfortable for Springfield.