Who is killing off the coal-fired plants?

We’ve found that the cancellation of the AECI plant in Norborne near Kansas City announced the first week in February is only one of many. In a hot-off-the-press report titled "The Risks of Participating in the AMPGS Coal Plant" - February 13, 2008, by David Schlissel of Synapse Energy Economics, Schlissel found that since late 2006, more than 20 plants have been cancelled! Synapse was commissioned by the Natural Resources Defense Council to assess the risks of the American Municipal Power Ohio’s (AMP-Ohio) proposed 960 MW coal-fired power plant in Meigs County, Ohio. The picture that emerged in the report is a grim one for investors in coal-fired power. The report said, “Since late 2006, more than twenty proposed coal-fired plants have been canceled. More than three dozen others have been delayed. State regulatory commissions in Oregon, Florida, North Carolina, Oklahoma and Washington State have rejected proposed power plants. The Secretary of Health and Environment of the State of Kansas has rejected permits for two 700 MW coal-fired power plants.”

Is it the environmental costs? The Midwest has the largest concentration of old, dirty coal-fired power plants in the nation. Illinois, Indiana, Iowa, Michigan, Ohio and Wisconsin account for one fifth of the carbon dioxide emissions in the United States, helping to give the Midwest the dubious distinction of being responsible for more global warming pollution than any single nation on the planet other than China, India, Japan and the former Soviet Union. Energy companies have been working frantically to build even more “old technology” coal plants throughout the Midwest. In 1977, when Congress amended the Clean Air Act in 1977, it "grandfathered-in" older power plants exempting them from compliance. They figured the older facilities would be closing down soon and the new regs would apply to the new plants that replaced them. The bureaucrats underestimated the capitalists. The companies kept their old smokers flying under the 1977 exemption with partial “renovations” of the “old” plants. At present, 65 percent of the coal-burning power plants operating in the United States were built before Jimmy Carter took office.

This is why the June 11, 2007 decision by the U.S. Supreme Court on the 1977 Clean Air Act, the AEP $4.6 BILLION settlement and the public’s abrupt change of opinion about Global Warming was a mega billion dollar shock to the Big Power Boys who thought they could slick their way out of compliance forever by telling the public they had only two choices, live with filthy air or freeze. Recently the public has decided they want more choices and somebody better start coming up with them fast.

In a last roll of the dice to find a technological miracle to solve their CO2 emissions problem, the highly touted new emissions technology to produce “clean” coal-fired plants (they’re still telling bald-faced lies about “clean coal” in industry TV commercials and web sites) fell through when the Bush Administration pulled the plug on the “FutureGen” project. FutureGen was a $1.5 billion demonstration plant that was to be built in Mattoon, Illinois. After two terms of assiduously ignoring our environmental and energy dependence problems, FutureGen was a last-minute, legacy-salvaging attempt by the Bush Administration to build and operate a “clean” coal-fired plant. It was supposed to incorporate a ground-breaking new method of storing greenhouse gases underground thus making the still “dirty” emissions “clean” because the dirty stuff would be tucked out of sight and out of mind underground. The problem with underground sequestration of emissions is that it was just a shoot-from-the-hip idea by some wistful optimist but no one actually knew how to do it or whether it would work. Energy Secretary Samuel P. Bodman cited mounting cost estimates and other possible technologies as the reason for backing out of the project. Uh huh.

Under the circumstances you could be forgiven for thinking it was pollution mitigation costs that are killing coal-fired plants but surprisingly they are being killed by something much less exotic. They are toppling like dominoes not because of corporate sensitivity to clean air concerns but because of the surprisingly rapid acceleration of the cost of building coal plants. What has done them in is their corporate lust for globalism. The benefits of globalism have come back to bite them in their collective fat asses; China and India are eating up their construction resources!

Contractors are not willing to give customers a fixed price for a project when the volatile costs for alloy pipe, steel, copper, concrete as well as a tight construction labor market keep pushing prices up. China and India are competing in the construction of these plants which has caused the capital costs for new generation to climb by more than 50% in the past three years, with a more than 70% of this increase resulting from engineering, procurement and construction (EPC) costs. As the president of the Siemens Power Generation Group told the New York Times, “There’s real sticker shock out there.” This is why we’re seeing articles such as “Wall Street Shows Skepticism Over Coal” and the three leading banks, “Citigroup Inc., J.P. Morgan Chase & Co. and the bad boys at Morgan Stanley all backing away from financing coal-fired projects because they no longer consider so-called “clean” coal to be a good investment.

The AMP plant in Meigs Ohio, subject of the Synapse report, “The Risks of Participating in the AMPGS Coal Plant,” had been given the green light by the engineering firm R.W. Beck, (a firm often used by Missouri utilities) but the Synapse report found that R.W. Beck had seriously under-priced the construction costs. Costs of the plant had skyrocketing from $1.2 billion in October 2005 to nearly $3.4 billion (with financing costs) – an increase of more than 180% – in less than 30 months! NRDC staff attorney Shannon Fisk was quoted in the Kansas City "infoZine" as saying “$3.3 billion never looked this bad. For that kind of price tag, AMP should be offering cutting edge technology. Instead, all they are giving you is a dirty plant running on outdated technology. They can do far better before tapping into ratepayers’ wallets for the next 50 years.” The article quoted AMP officials who “conceded they will be unlikely to secure a fixed price construction contract. This means that as construction prices continue to grow, the cost escalations will be absorbed by municipalities and ratepayers.” AMP officials didn’t blink at the idea that they would be squeezing municipalities and ratepayers to pay for escalating and unlimited costs. What awful news for the Ohio municipalities who seem to have walked blindly into this power financing scheme for the AMP plant that sounds like a twin of MoPEP. Both will result in killer utility rates because of bad business planning and uncontrolled costs.

Just when you think it can’t get worse, last week Forbes magazine reported that coal prices will likely double by 2009! The Wall Street Journal this week reported that some coal futures on the New York Mercantile exchange have doubled since 2007 and Chinese demand is likely to push prices by up to 40 percent in the coming months. AMP has acknowledged that they will likely use an eastern blend of coal to fuel the plant. Much of this coal would come from Central Appalachia, where coal is often ‘mined’ by blasting the top off mountains.

While the real world of banking and finance is retreating at top speed from coal-fired plants and while the cost of the plants are accelerating out of all reason, Duncan Kincheloe and his MJMEUC/MoPEP boys are out buying up more stock in more coal-fired power plants that are rapidly becoming the buggy whip factories of the power world. When are the MoPEP municipalities, who by their laziness and gullibility got their citizens and utility ratepayers into this monumental open-ended mess, going to get off their fat elected asses and demand a public accounting from Kincheloe of what the additional costs are expected to be involved in building the five or six plants MJMEUC has invested in? Do they have fixed price contracts or not? Even if they do, what are the chances that the contractor will stick to the prices if it means he has to swallow huge price increases for materials? Kincheloe has been getting regular reports on this subject. Who is he sharing this information with, his MoPEP Committee lap dogs, the cities that signed his contracts or no one?

With the lies that have already been told by MJMEUC’s board and management about the ‘benefits’ of their investment scheme, and the skimpy, and/or non-existent examination by the various municipal auditors, the only objective answers we are likely to get will come from the State Auditors office. It’s time State Auditor Susan Montee started paying attention to the carnage that’s ripening right under her nose. This is not going to go away so it’s either cut off MJMEUC’s run-away debt machine now at the $1.2 billion mark or she and the next Governor and the Secretary of State may be up to their hip boots in bankrupt small communities.

How do you start an audit petition?

Time out for an audit petition tutorial. If you live in a MoPEP town and have figured out that your inflated electric rates are due to the MoPEP contract your non-reading city council members signed a few years ago, and if your local officials are too chicken or too hostile to do anything about the MoPEP trap they’ve gotten you into, go to the Missouri State Auditor's web site. It’s all there. Your petition wording must state the estimated amount of the cost of the audit that the city will have to pay. The state auditor’s office will give you all that. First call your county clerk and ask how many people in your city voted in the last governor’s election. The required number of signatures for a petition audit of a political subdivision the size of the City of Rolla is ten percent of the number of votes cast for the office of Governor in the most recent general election with a minimum requirement of 750. To give you an idea, The City of Rolla had 6,678 votes cast in the last gubernatorial election. The petitioners got a total of 1,006 signatures “of registered resident voters” just to make sure they had plenty and 752 were verified by the County Clerk. The city of Marceline needs 200 signatures. The “sliding scale” formula for this calculation is on the auditor’s web site and it’s very confusing. Just call the auditor’s phone number below and they will figure it out for you and they will provide you with a petition form with the correct legal language so you won’t make any mistakes in wording. Then just print out your petitions and get going. Be ready with a statement or printed press release to explain what you’re doing and why and also be prepared for an angry backlash from City Hall. Typically, any government just detests being audited by an auditor they aren’t paying and can’t control and in this case they will get hysterical because they have a very guilty conscience. Even they have probably figured out by now there’s something really wrong with that MoPEP contract they were too lazy to read. They don’t want to stir their stumps to do anything about it but they also don’t want their carelessness spread out for the whole town to see in a state audit. Most people are doing petitions to have the city audited but Farmington did an audit petition and a petition to recall their mayor at the same time. The people in Farmington were really, really mad and wanted their politicians to know just how mad they were.

To find out about the petition process, contact the State Auditor's Office at:

P. O. Box 869
Jefferson City, MO 65102
Phone: (573) 751-4213
Toll Free: 1-800-347-8597or moaudit@.auditor.mo.gov

If you have any problems e-mail me or you can go to the link RMU4YOU link on the right and thorough their web site contact either Tracey or Donna. They just successfully completed the Rolla petition drive and they can give you good advice on how to do it.

We wonder when State Auditor Susan Montee will begin to get the point. Her staff is increasingly being tied up with petition demands for city audits only because of MoPEP. Wouldn’t it be more cost-effective for her to just audit the MoPEP vulture in his nest instead of watching while he picks off the bunnies one-by-one?

Marceline, Missouri citizens start a petition drive for a state audit!

Marceline Missouri (pop. 2,558 - Linn County) is not a MoPEP member city. The city has contracted to buy electricity, not from MoPEP’s “bundled” power, but only from the Prairie State Energy Campus power when and if it starts producing power. The week of March 9^th, Marceline citizens kicked off their petition for the State Auditor to audit the City of Marceline. They need 200 signatures and already have 100. Their current electrical base rate for a four tier system is: base rate $12.00; first 500 kWh-$ 0.1230; next 1000 kWh-$ 0.0730; over 1500 kWh-$ 0.0660. Marceline citizens are already having rate shock even before they start paying for the power they’ve contracted to buy from the unfinished Prairie State power plant under their new “Amended and Restated Unit Power Purchase Agreement.” The Unit Power Purchase Agreements are a different (but not better) kind of MUMEUC deal from the “Amended and Restated Missouri Public Energy Pool #1 Agreement among Missouri Joint Municipal Electric Utility Commission and Pool Members” a.k.a., the MoPEP contract. For some of the differences between the two types of contracts go back to the Feb. 20, 2008 post: “The Amended and Restated Unit Power Purchase Agreement”- MoPEP’s Ugly Sister.” We’ll keep you posted on Marceline’s petition progress.

The “Great Diesel Generator Scheme” – Darwin Award or a mass lapse in judgment?

The “Great Diesel Generator Scheme” appeared sometime pre 2000 when Kincheloe figured out that buying power from the big commercial wholesale power producers, such as Ameren UE, KCP&L and others, and buying power on the spot market (a mugs game) then adding his markup and passing it on to the 20-some towns then in his MoPEP pool so they could add their markup to all the other markups just wasn’t working very well. In the shark tank of Big Power, Kincheloe was a guppy - he was way outclassed. Being the middleman’s middleman wasn’t a recipe for growth and it wouldn’t get him any closer to the uber-millions in assets and revenues he needed to become a member of the Club for Big Power Guys. All this marking up also wasn’t giving his MoPEP members the cheap power through the “economies of scale” he had promised to get them to join his MoPEP club. His reputation among his utility linemen as the “Wizard of Power” was beginning to suffer. To cut out some of the middlemen he had to become a producer of power not just a bundler.

His business plan was to turn his MoPEP member towns into a statewide "generator farm" by using diesel generators, linked-up via the SCADA computer system chugging away in each member town making juice for him to sell at a profit…well at least that was the plan. The fact that diesel generators are noisy, emit smelly carcinogenic fumes and diesel fuel costs about the same as gasoline seemed to bother no one. The MoPEP utility guys never see any of the holes in his business plans because the MoPEP “Pool Members” have little or no business experience. (No Virginia, running a municipal monopoly that overcharges captive customers is not running a business.)

(Note: The MoPEP contract Kincheloe issued back in the 1990’s to implement the diesel generator farm system would, in 2005, become the “Amended and Restated…” MoPEP contract. That’s the one that today controls all the MoPEP members who overcharge their customers to pay for his revenue bond investments in coal-fired power plants. That’s why the new contract was “Amended and Restated…” The cities were told the “Amended and Restated” contract was “just a few routine amendments to the old contract.”)

Kincheloe told them they could become independent of the big power producers by becoming part of his “generator farm” which would work because of “economies of scale.” Someday, he told them, they would laugh all the way to the bank at the big guys because they would be producing their own power and selling it to each other and selling it to non MoPEP members at a big retail markup. Hot Diggity Dog, that was the ticket - everyone wanted to get in on this one no matter what that “scale” thing was all about. Apparently no one questioned why there were no studies and no detailed cost analysis of this generator scheme by impartial experts. No one asked - if this was such a super idea – why wasn’t everyone doing it? All the MoPEP-ers were told was that this would work because of “economies of scale.” They had no idea what that meant but it sounded good. Each MoPEP-er was sent home to get authorization from his city government (but not from the voters) to issue millions in revenue bonds to buy some diesel generators.

All these revenue bonds would be processed through MAMU, the Missouri Association of Municipal Utilities, a non-profit 501 (c) (6) affiliate of MJMEUC. MAMU is their lobbying arm and it also offers its members "financing services.” MAMU actually hands over the processing and sale of each member’s revenue bonds to the Missouri Development Finance Board (MDFB) the state’s bond agency but first MAMU takes a “taste” as their commission for mailing the paperwork on to the MDFB. Their brochure puts it this way, “MAMU sponsors the debt through the MDFB.” They take a commission to sponsor your debt? That’s cute.

At first glance the diesel generator farm scheme, either by design or by accident, appears to be a modified Ponzi scheme but it’s more complicated than anything Italian immigrant Charles Ponzi came up with in 1903 so we’d have to call it a “Super Ponzi” or Kincheloe’s “Great Diesel Generator Scheme.” Today's Ponzi Schemes are often considerably more sophisticated than Ponzi's original, although the underlying formula is the same. The principle behind every Ponzi scheme is to exploit lapses in judgment arising from investor naïveté. Naïveté and lapses in judgment are things MoPEP towns have in abundance.

How it works….or doesn’t. As far as we can tell from the MoPEP contract, Rolla’s utility financial statements, and news reports from other member cities, after Kincheloe’s MoPEP members had invested millions in revenue bond debt to get their diesel generators and after they started generating power to sell to MoPEP*, they were ‘paid,’ with MoPEP “credits” for the diesel power they manufactured to “sell” to MoPEP. In the 2005 MoPEP contract Art. IV, 4.1 (b) says, “MoPEP #1’s compensation to each Pool Member for usability and use of its resources will be in the form of a billing credit against the Pool Members bill from MJMEUC.” This “credit” is a note that says “MoPEP owes you $X.00.” That’s the first Ponzi. But a ‘credit’ of any kind is only good if you can redeem it at will and if the credit has a well-defined value which is agreed-upon by all parties to the contract. MoPEP credits do not fit this definition. Where the rest of us use standardized paper called “money,” MoPEP uses “credits” that have a whimsical value system as determined from time to time by the MoPEP Pool Committee (4.1(a)) “based on market price and other market factors.” The contract does not specify – as it should - how ‘value’ is determined or to which market indicator the value will be pegged so that the value of each credit and its transaction can be verified and reconciled by audit at any later time. However – and here’s the catch - if Director Kincheloe and the MJMEUC board doesn’t like the prices or rates the MoPEP Pool Committee has established, the board members of MJMEUC and the managing director (Kincheloe) have the power to override the decision of the MoPEP committee and change the price (4.3 last sentence). So the illusion that the MoPEP “Pool Committee” members are representing anyone or deciding anything is clearly a sham and a facade for the real power – Director Kincheloe and his hand-picked MJMEUC board. That’s a Super Ponzi. *(Some of MoPEP’s re-bundled power is sold to non-member clients both in and out of state – Memphis Tennessee is one non-member client.)

If this weren’t such a tragedy for so many people who struggle to pay their artificially inflated MoPEP electric bills and who are threatened with being forced to pay even more expensive utility bills, it would just be a funny story about foolish people…but it isn’t. So…Kincheloe has now saddled his home boys with huge revenue bond debts or lease/purchase debts to MAMU for “sponsored debt,” to pay off their diesel generator debt but they can’t pay off their revenue bond debts out of their diesel generator “revenue” because their only “revenue” from the generators is in MoPEP IOU’s which are being used to pay their MoPEP electric bills and which are worthless for making bond payments anyway. Bond holders don’t take homemade ‘money’ or Kincheloe’s MoPEP “credits” as payment. But if the revenue from the generators is being used to apply against the members MoPEP bills as the contract says, then the cities with generator bond payments must be paying their bond debts out of the general fund which they aren’t supposed to do. Oh well, what’s one constitutional violation among fifty.

This is the Darwin Award part. Meanwhile, the MoPEP-ers are paying cash to buy tanker trucks full of expensive diesel fuel which they pour into their expensive generators to generate expensive electricity which they ‘sell’ to MoPEP (that’s themselves). The MoPEP Pool Committee (that’s them too) then decides (or think they are deciding) how much the ‘credits’ are worth that they’ve earned from making diesel power. The contract (4.1(a)) says this is “based on market price and other market factors” whatever that means but it doesn’t say it’s based on the true cost of producing a ‘credit.’ After the value of one of these credits is determined by the Pool Committee, then they also decide the amount of each Pool Members “Assessment” (4.3) that’s the rate established by the Pool Committee (that’s them again) of the value of MoPEP’s Services to Pool Members (themselves) which “shall include recovery of MJMEUC’s direct costs to acquire, provide and deliver Services.” (You remember the “direct costs” don’t you, the costs that can include a million dollar new office building, an “inspection” trip to China, or whatever else “without limitation?) By the time all Kincheloe’s “Services” are deducted from the value of the diesel ‘credit’ they produced with their little gas cans full of expensive diesel fuel there isn’t much left of the ‘credit’ to apply to the members huge MoPEP power bills. In the case where MoPEP credits are being accumulated, (if such a thing is ever allowed to happen) any 100 credits might have 10 or more different values depending on which time period and what “other market factors” were used to determine their value. Now everyone who believes that the utility guys who are supposed to be doing all these calculations are really doing them stand on your head and honk like a goose.

This process is so boneheaded and open for manipulation it’s almost beyond belief that anyone would fall for it much less that over 30 towns - all with access to legal counsel - would walk into it without reading it, but it gets worse. It is unlikely that any of the utility managers know how to keep track of their real costs per kilowatt which should be the base number in the formula to calculate the value of one diesel kilowatt. Having established the cost of one diesel kilowatt then they would determine whether one or 10 or 100 kilowatts become one MoPEP ‘credit.’ It is also unlikely that any of the differential costs between the cities or the variables between the individual generators in the same town are being reconciled to arrive at a fair base for all these calculations. The contract doesn’t say…no one can say.

Here’s the grand finale or the Grand Folly. The diesel-generated power they sold to MoPEP (to themselves) for devalued ‘credits’ (for “devalued credits” read “cheap”), Kincheloe mixes with his other power purchases; then he marks it all up and sells it right back to these Darwin Award winners who produced and sold to him the diesel part of the power that they’re buying back with his markup added into the price! It makes your brain hurt doesn’t it? Kincheloe is actually selling back to the MoPEP cities - for cash - the same power those cities manufactured but were paid for in devalued MoPEP ‘credits!’

After they fed their own cash into the generators to get the process started and deducted the cost of MoPEP’s “Services” was there any “added value” at the end when they applied their credits against their electric bills? Would it have been more cost effective not to have the generators at all and just use cash to pay the MoPEP electric bill instead of going through this elaborate conversion of bond debt to diesel fuel to kilowatts to manipulated MoPEP accounting to….? These are questions an independent expert would have provided to tell the MoPEP members whether the scheme was sound or not before they were locked into it. Did they hire one or were they told it wasn’t necessary?

The bottom line here is that Kincheloe is getting virtually free power from all the MoPEP diesel generators and selling it back to his patsy’s. But despite being subsidized by MoPEP communities with free or nearly free diesel power - he still can’t deliver the cheaper power product he promised them with his “economies of scale” propaganda. Proof of this is that MoPEP’s wholesale price of 6.53¢ per kilowatt is nearly the same as the retail price (average s/w rates) of about 6.7¢ per kilowatt charged by commercial producers to their direct residential customers! After each MoPEP town adds their local 3¢ to 5¢ markup on top of MoPEP’s 6.53¢ “wholesale” rate you can see why MoPEP towns have local electric rates of from 9.3¢ in Rolla up to 11¢ and 12¢ per kWh in other unfortunate MoPEP towns.

MoPEP credits then are IOU’s or a form of private MoPEP currency with poorly calculated costs, inflated administrative charges against the credits and a floating value which can be set or changed at the convenience of MJMEUC. No legitimate business is done with such sloppy methods. The MoPEP members who are the holders of this “sterile” MoPEP “money” or MoPEP IOU’s, cannot put them in a bank to earn interest and they can’t use them to purchase supplies or make payroll and they can’t sell them to anyone else. They can only spend their MoPEP credits in the MoPEP company store for goods priced by the company and they can only spend their ‘credits’ when the company decides the store is open for business!

Obviously the MoPEP diesel-kilowatts-for-credits scheme needs a top to bottom investigation. How this system works is not explained in either the auditors “Notes” of each city’s private audits nor are they explained in the audits of MAMU or MJMEUC. In fact, MoPEP “credits” are not mentioned in any audits at all. How strange, all those millions payable and receivable in this kilowatts-for-credits scheme and there is no mention of it in any of the audits on either end. As far as we know no private city auditor has investigated the diesel-kilowatts-for-credits arrangement and assured their municipal clients that Kincheloe’s “Great Diesel Generator Scheme” is legitimate or if his clients are losing their shirts. Whichever, this business scheme of Kincheloe’s didn’t work either that’s why his next business plan was his most ambitions so far…using his MoPEP members as guarantors to issue over a BILLION dollars in revenue bonds to buy into a dying industry - coal-fired power plants.

Duncan Kincheloe’s next investment…"The Love Canal Bottled Water Co?"

No matter what all the “Clean Coal” commercials say coal-fired plants aren’t ‘clean’ they’re just different degrees of dirty. Over the last ten years coal-fired plants have sprung up in the Prairie states like noxious multi flora rose. The reason they’re being built in the Midwest is that we don’t have the strict emissions laws that were developed over the previous decades on the East and West coasts to limit smoke-belching power plants. They’re way ahead of us in environmental protection legislation and in the influence of large and powerful environmental lobby groups. Midwestern states typically have out-dated, flimsy regulations for coal-fired plants so when it came to laws to protect the environment we were standing out here on the prairie buck naked – perfect targets. Supplying the Midwest states and the Rust Belt with electricity wasn’t the prime reason for this proliferation of coal-fired plants. The real reason was to supply the more lucrative East and West coast power markets. National environmental protection groups like the Sierra Club, Environmental Defense and the St. Louis-based, Great Rivers Environmental Law Center, are making progress but they are, pretty much, our only line of defense.

In October, 2007, the U.S. Justice Department settled a landmark case against American Electric Power (AEP) for $4.6 billion. AEP will finally be forced to invest in new pollution controls at its existing plants and they must pay various cash amounts to the plaintiff states downwind of the Ohio plants. The EPA, twelve environmental groups and the eight states, Connecticut, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island and Vermont, accused American Electric Power of rebuilding coal-fired power plants without installing pollution controls as required under the Clean Air Act. The EPA brought suit against the company in 1999, just when Kincheloe was getting ready to launch his great MoPEP scheme.

For years AEP and other old polluting plants had been “grandfathered” and exempted from compliance with updated air quality standards. But when they renovated and expanded their old plants, the Justice Department and several downwind states pounced on the non-compliance of the “new” plants. AEP refused to comply claiming the EPA didn’t have the authority to decide what dirty air was - the battle lasted six years. AEP lost that fight and the $4.6 billion AEP settlement was the largest single environmental settlement in history and it will no doubt work just like the tobacco lawsuits. Once the tobacco nut was cracked, every other state used the landmark case to file and quickly “settle” to get its share of the tobacco lawsuit pie…as easy as picking overripe fruit. The AEP settlement was a warning to the industry and to all coal-fired investors. One of those investors was Duncan Kincheloe who at that moment was busy selling over a BILLION dollars in revenue bonds to buy stock in as many coal-fired plants as possible. How many states downwind of all these new MJMEUC coal-fired plants are just waiting for Kincheloe and his fellow investors to fire up the boilers so they can file a lawsuit and pick up their multi-million dollar damage settlements?

Four months before the settlement on June 11, 2007, the U.S. Supreme Court ruled that, oh yes, the EPA did so have the authority to regulate greenhouse emissions from new motor vehicles, coal-fired plants and any other emissions if the EPA finds that greenhouse gases "may reasonably be anticipated to endanger the public health or welfare." This Supreme Court decision and the EPA suits had been in the works since 1999; they were not footnotes in some obscure legal history, they were watershed events, big headlines in the power industry and in every major and most minor newspaper in the country. The consequences of a dirty industry finally being forced to comply with Clean Air Act had been the topic of industry articles and lobbyists workshops for years. It was not possible that Duncan Kincheloe didn’t know about these looming decisions and understand the risk in investing in coal-fired plants just as all this was coming to a head, yet he went right ahead during those six years from 1999 to 2007 creating The MoPEP Machine.

Investments in coal-fired plants are not for amateurs like Duncan Kincheloe and his consortium of baffled and confused utility linemen turned investment moguls. Kincheloe, a former Gov. Ashcroft aid, member of Governor Blunt’s Personnel Committee, Enron investor and long-time Republican sycophant will find his political and environmental landscape changing drastically after January 2009. No matter which party wins, a real national energy policy, which is decades overdue, will be based upon drastically reductions in carbon emissions that will hopefully impact global warming. The political impact on Kincheloe’s MJMEUC/MoPEP coal-fired, carbon-emitting investment portfolio will not be a pretty one. The financial impact of Kincheloe's carbon-belching investment portfolio will be devastating to his unwary, small town MoPEP investors.

The fall-out begins. This week several readers and one electric company executive sent me the following articles. The first is an announcement by Associated Electric Cooperative, Inc. that they are canceling plans for their coal-fired plant in Norborne near Kansas City, Missouri. This plant would have emitted over 6.8 tons of carbon dioxide and other toxic materials annually and emitted over 340 million tons over the 50-year life of the plant. AEC board member, Dan McQuitty, said, “Although AEC has received state approval to build a 780-megawatt coal-fired plant, the co-op's 12-member board voted Friday to delay the project indefinitely.” The expected cost of the project has nearly doubled from $1 billion, McQuitty said. Also, “the utility anticipates the Democratic majority in Congress to push for carbon dioxide emission controls and tougher federal regulation of greenhouse gases.” See there McQuitty and the AEC are smart enough to figure out that there is going to be a political sea-change.

The second news article, "Wall Street Shows Skepticism Over Coal" is an announcement by the three biggest banks on Wall Street that they no longer consider the so-called “clean coal” to be a good investment. Citigroup Inc., J.P. Morgan Chase & Co. and Morgan Stanley have concluded that the U.S. government will cap greenhouse-gas emissions from power plants sometime in the next few years. In future, these bell weather banks "will require utilities seeking financing for coal-fired plants to prove the plants will be economically viable even under potentially stringent federal caps on carbon dioxide, the main man-made greenhouse gas.” They also said they expect all three presidential candidates to move government policies away from coal toward alternative energy initiatives. See there, everybody knew this but Kincheloe and the MJMEUC/MoPEP guys. Banks are naturally risk-adverse and they don't want to be involved with debt that will go bad as a result of government emissions caps that require the power plants they finance to buy large numbers of extra pollution ‘allowances.’ They also don’t finance businesses that have a liability settlement history of shelling out $4.6 billion to everyone living downwind of their smoke plume. If the three biggest banks in America say investing in coal-fired plants is too risky for them with their trillion dollar assets, what are little towns like La Plata, Hermann and Rolla doing plunging into these high-risk investments? When Citigroup Inc., J.P. Morgan Chase & Co. and Morgan Stanley say the coal-fired party is over…it’s over.

Hal Clark, co-chair of Citi’s power-sector investment banking division said that when utilities apply for financing for coal-fired plants, the banks will use "somewhat conservative" assumptions about future caps. The banks say they will consider the possibility that utilities will have to pay for their (pollution) allowances -- an idea the utilities are fighting and it’s a fight they will lose. If utilities have to pay huge penalties for their pollution “allowances” they would pass those costs on to their customers which would make their power prohibitively expensive. Mark Brownstein, an Environmental Defense official, says if utilities have to pay for emission allowances, "the days of conventional coal really are over." One bank official conceded that some conventional coal-fired plants might pass muster for financing if the utility showed it could raise its rates to cover the higher cost of polluting.

That last ominous comment about the utility or its investors showing that they could raise rates to cover the higher cost of polluting is very bad news for everyone trapped in MoPEP. It's bad enough that in the MJMEUC contracts that bought ownership shares in the five to seven power plants Kincheloe and MJMEUC/MoPEP have already agreed to force each MoPEP city utility to raise its rates as often and as high as necessary to cover all costs of the MJMEUC contracts with their punishing “life-of-unit, take-or-pay and step-up” provisions but now all Kincheloe and MJMEUC have to do is throw the new multi-million dollar carbon emissions penalties imposed on their coal-fired plants into the MoPEP “direct costs” bills that each MoPEP member gets on a monthly basis. They assume that all their MoPEP-tied city utilities will just pass the multi-million dollar carbon 'allowance' fines on to their unfortunate retail customers as well. Their assumption that there is no limit to their "pass-along" billing machines is wrong. You simply can’t get blood out of a stone and with people on fixed incomes and the poor there is an absolute limit to how much they can pay. When houses and then towns start to empty out who will pay MoPEP’s overpriced bills? If MoPEP cities just stop paying Kincheloe's over-inflated bills how is he going to make them pay? Will he use his first-lien power and take over their failing utility revenues in their failing little towns as people move away to towns with reasonable rates?

Was this what Duncan Kincheloe had in mind when he acted as Judas Goat and led 31 impoverished and befuddled little towns into a BILLION+ dollar investment? The handwriting was on the wall six years ago. Banks had already begun to back away from financing these mega billion dollar power projects, that’s why the power industry developers were pimping clueless little municipalities like MOPEP members to provide financing through MJMEUC’s tax-free municipal revenue bonds.

The AEP $4.6 BILLION settlement was not a great surprise coming on the heels of the historic U.S. Supreme Court decision on the Clean Air Act in June 11, 2007. The question is this, if Duncan Kincheloe is the business genius who is going to lead them to the Promised Land as his MoPEP utility guys seem to think he is, why didn’t he anticipate (as other pros in the industry did) this adverse event anytime from 1999 to 2007 when these cases were filed and decided? It was from 1999 to 2007 that he was building his MJMEUC/MoPEP Machine and gobbling up every coal-fired investment he could find. Other pros in the industry knew their days of telling the public that they had to accept dirty air as the price of having power were over. The public is no longer swallowing “the ends justify the means.” How was it that Kincheloe was the only one who didn’t catch on?

Why didn’t Kincheloe take the conservative, prudent approach and stay away from what was, later if not sooner, going to become a cascading series of bad news events for this dirty industry? We can only speculate that it was because Kincheloe is a political apparatchik he is not a business expert. As a long-time political operative he evidentially believed the 1994 propaganda of the Republican Party and Newt Gingrich that they would rule for 40 years. They assumed that a natural result of their dominance would be that their uber-conservative appointees to the Supreme Court would continue to bail out the old polluting industries. What Kincheloe apparently didn’t consider was that Newt and the Republican Party could be wrong and that Supreme Court Justices, as elevated and as Republican as they may be, prefer to breathe clean air.

From 2000 to 2007, while the coal-fired power industry was floundering, Kincheloe, the MJMEUC business guru, has been busily tying down 31 little dumb towns on the railroad tracks. Well, if the wheels start coming off Kincheloe’s investment wagon he only has to resign his several lucrative CEO-ships and move somewhere that has PSC-regulated utilities. The little rural towns will be left behind with this mess wondering what coal-fired train hit them.

Duncan Kincheloe and the MJMEUC board belatedly decided to diversify their investment portfolio a little so they plunged another $8,715,000 into a soybean ethanol plant in Laddonia, Missouri. They thought they were going to get in on what the Bush administration erroneously perceived to be one answer to the oil crisis. However, anyone who has looked deeply into this experimental industry knows grain-based fuels use nearly as much oil to produce as their ethanol output and even worse, grain-based fuels play havoc with grain-based food prices. In short, grain-based ethanol is a dead end. In the general enthusiasm for what sounded like an easy "no-pain" solution to the clever idea of growing our own fuel, few have examined the second fatal flaw in the ethanol ‘miracle’ – water. Ethanol processing plants, are little more than giant moonshine stills and they use too much precious water, a commodity that is becoming scarce and someday will be as costly as oil. Without massive ethanol subsidies, which mostly benefit giant agricultural corporations, grain-based ethanol will be left in the dust as rapid R&D advances began to catch up with our wasted fuel policy years.

If the Ladonia plant quickly becomes ‘old tech’ due to innovations in energy R&D or because of changes in energy politics and policies, who will pay off Laddonia’s $8,715,000 debt? Who will pay for the mega-million dollar cost of converting it to some other type of production - if that is even possible? The owners –that’s you - will pay of course. The opportunities for failure in Duncan Kincheloe’s “Business Plan for Billion Dollar Energy Plant Investments in Dirty or Dead End Technology” are legion. Wise old African say: “First dumb Wildebeest to cross river become dinner for crocodile.” They should have let some other dumb beast feed the ethanol crocodile before investing in a technology that was obsolete and impractical before the first ethanol still was built.

So much for the penetrating business insight of Kincheloe and his MJMEUC puppet board. Just as Kincheloe and the board had pushed 31 nearly bankrupt small rural towns into a BILLION dollar investment in dirty old coal, the environmental worm turned as the Supreme Court ruled against smokestacks and the three biggest banks in America announced that King Coal was dead. Can bad business judgment and bad timing get any worse than that? Kincheloe’s answer was to ‘diversify’ their investment portfolio into an impractical and politically unsustainable investment in a giant soybean still. With Kincheloe’s business acumen the next investment he will recommend to his coterie of utility linemen-turned-equity-investors will be the "Love Canal Bottled Water Company."

But that’s not the only bad business idea Kincheloe has pushed these people into. Next we will explain The Great Generator Scam that made Duncan Kincheloe a household word in the power industry…but not in a good way.

Audit signatures verified

Rolla Daily News

Sunday, March 2, 2008 10:46 PM CST
Alan Lewis Gerstenecker, Editor

The citizens group RMU4YOU! received confirmation Friday from the Phelps County Clerk’s office that it has attained a sufficient number of signatures of registered voters to bring about an audit of Rolla city finances and Rolla Municipal Utilities.

Last month, representatives of the citizens utility group hand-carried their petition to Jefferson City and presented it to representatives in the office of Susan Montee, Missouri State Auditor.

“We heard Friday they verified 746 signatures of the signatures,” said RMU4YOU! co-founder Tracey Watson. “We were told we only needed a little more than 650 signatures. So, it’s great. I’m ecstatic.”

The number of verified registered voters’ signatures is a percentage of those who voted in the last municipal election. The group submitted 1,015 signatures last month with its petition to seek the audit.

Coincidentally, the confirmation of verification comes almost a year after the group began its crusade for the audit.

“It’s been a year. A long year, but we’re not nearly done,” Watson said. “Maybe now we can get some answers,” she said.

Watson, RMU4YOU! co-founder Donna Hawley and members of the group, have been critical of the utility and its contract with the Missouri Public Energy Pool (MoPEP) for most of the last year.

Late last summer, Mayor William S. Jenks, III, trying to stem the sometime heated dialogue during City Council meetings, asked both sides to refrain from name-calling and personal attacks.

City Council meetings have been exchanges between Watson and Hawley and RMU officials, including Board of Public Works President Dr. James Stoffer.

The audit, which is expected to be scheduled within the next 30 days, will begin with city finances and involve RMU as it seeks information about its business and rate-setting practices and compliance with the Missouri Sunshine Law.

The Board of Public Works usually meets at 4 p.m. on the fourth Monday of the month at the RMU Training Room at 811 Highway O, the RMU Service Building.

Cost of the audit, which is estimated between $16,000 to $24,000, will be paid by the city.