Monday, December 13, 2010

Frustration mounts in city’s ongoing attempt to exit MoPEP

Wednesday, 01 December 2010 08:32 Dave Marner ed. Gasconade County Republican

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OWENSVILLE officials including Mayor Dixon Somerville (fourth from left) and City Administrator John Tracy (to his left) are flanked respectively Monday by Leland Curtis, special counsel to the city, and Dr. Michael Proctor, electric consultant, during a joint committee meeting of MoPEP members. OWENSVILLE officials including Mayor Dixon Somerville (fourth from left) and City Administrator John Tracy (to his left) are flanked respectively Monday by Leland Curtis, special counsel to the city, and Dr. Michael Proctor, electric consultant, during a joint committee meeting of MoPEP members. COLUMBIA — Owensville’s next step in its MoPEP exit strategy may be a legal one…playing the game with continuously moving goalposts certainly is not working.
Owensville officials met Monday with MoPEP rate and contract committee members seeking answers to three specific questions. “We made our case and it appears we didn’t get a direct answer again,” said City Administrator John Tracy.  “We requested a vote and evidently didn’t get a vote.”
Duncan Kincheloe, general manager for MPUA, revealed few details about the majority of a 2-hour, 20-minute closed joint session of the Committee on MoPEP Contract Matters and MoPEP Services and Rates Committee. “It was a closed meeting,” said Kincheloe. “There was an opportunity to further the discussion. There was feedback.”

Kincheloe confirmed there were no votes taken when asked if Owensville received it’s thumbs “up or down” vote as requested on three proposals presented by Mayor Dixon Somerville in an Oct. 22 letter to Kincheloe.
“I’m not sure what was expected. They got some response to questions they posed,” said Kincheloe. He called the discussion “beneficial to all” and added “the discussion moved forward.”

Kincheloe said committee members asked he and his staff to prepare a “status report” for the combined MJMEUC and MoPEP meeting on Dec. 9. He added that if Owensville desired any additional meetings over the next few weeks, committee members were willing to “try to accommodate” those requests.

Tracy said members of the joint committees meeting Monday requested additional documents related to an offer to buy the city’s power transmission system from a publicly-traded electric generator and supplier. “That’s none of their damned business,” said Tracy noting the offer has yet to be made public. “It’s not going to happen.”
Tracy said members of the two committees should worry about their own community’s financial operations and added “the city of Owensville is capable of running theirs.”

The Republican was granted access to the 55-minute long portion of the meeting which included only Owensville’s presentation to the committee members. During their presentation, city officials, their attorney, and a consultant spelled out Owensville’s financial problems and the city’s need to exit the pool.

Kincheloe opened the session by giving an overview of Owensville’s request.  He noted the city’s “internal finances are the main concern. Internal finances and local debt.”

He also spelled out what could be done as far as granting a city’s release from MoPEP. “A city’s legal, long-term obligation, contractual obligation, can be transferred to another municipality while in keeping with the MoPEP contract,” he said.

Kincheloe noted the commission was not in a position to speak with any other potential pool members seeking  “assigning status to another city.”

“My position,” added Kincheloe, “a city must take the lead in that process.”

He noted the committee must act to protest the pool from contractual obligations of a city seeking an exit. He also wanted to make sure the pool was “held harmless” for any costs to make the transfer.

He noted the mayor’s letter sought a “equitable accommodation. ‘Give us a break’ is basically Owensville’s basic position. Make it fair and accommodating.”

He posed the questions: would additional pool cities offset stranded costs? Would taking a potential loss a power contract be offset by the additional load from more cities? Are shared capacity costs a benefit to the pool?

At 11:25 a.m., the joint committees excused The Republican’s reporter and met until noon with city representatives. After excusing city officials, the committees worked through a box lunch. “It’s tough in there,” said a committee member during a quick break after lunch. “We never stopped. We worked right through lunch,” said Floyd Gilzow, a MJMEUC staff member.

City personnel were invited back into the closed session at about 1:15  p.m. and met behind closed doors with committeemen until 1:45 p.m.

Two minutes later the committees adjourned.

Standing in Owensville’s way as the city attempts to sell off its electric utility system is a release from its MoPEP obligations including the apparently unresolved stranded cost issues and an assignment (to an incoming pool member) of long-term power contracts arranged on the city’s behalf. “The main thing is we wanted an answer on stranded costs and we didn’t get that and probably won’t get that,” said Tracy on Tuesday.

During the city’s presentation, Dr. Michael Proctor, a power supply consultant retained by the city, noted figures from 2008 showed a potential for $120,000 in annual costs to the city for stranded costs issues. In 2009, however, the cost jumped to $800,000-plus annually. Proctor explained that while the cost of wholesale electricity dropped 70 percent in 2009, that actually increased stranded cost issues by 30 percent.

That translated from a potential fee of $8 per month per city customer using 2008 figures to $56 per month using 2009 costs.

“That just was not do-able,” Proctor told the committee.

Proctor asked the committee to consider the “benefit of energy freed up if Owensville left (the pool).” Consider, he said, “the value of (this) energy in the open market.”

City officials also contend no one from the city signed a power contract with Ameren Energy locking the city into a contract until 2021. Therefore, they say there should be no stranded cost issues if Owensville should be granted an exit from the pool.

“Owensville’s case is one of hardship,” said Leland B. Curtis, of Curtis, Heinz, Garrett & O’Keefe, PC, of St. Louis, the city’s special legal counsel. He said the bonding practices using “unique financing” have create “an intolerable situation.”

The 11 to 12-cent per kilowatt hour rate for electricity the city’s residents have been paying is “another straw breaking the camel’s back.”

“It is a hardship situation. It is a unique situation,” said Curtis. (Read whole article)