The MoPEP Machine: MJMEUC primes the pump with $10 million loan in pre-construction debt

Wednesday, February 13, 2008

MJMEUC primes the pump with $10 million loan in pre-construction debt

By 2005 the MoPEP Machine had successfully passed the referendum and the General Assembly had obligingly made the specialized legislation changes they needed. They had, as Kincheloe put it, “set the stage for this expansion.” By the fall of 2005, they had signed up 25 or 26 MoPEP #1 members to 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. Those first 25 or 26 contracts gave Kincheloe and the MJMEUC a first lien on all the electric revenues of all MoPEP members…forever. They were now forced to pay any amount “without limitation” that the MJMEUC board and Kincheloe choose to bill them. The “direct costs” clause in the contract covered any expense “without limitation.” The contract appeared to be an inescapable trap for MoPEP’s collateral mice. With the two dozen plus MoPEP members Kincheloe’s membership “collateral,” as represented by their combined electric revenues, had reached critical mass and the investment scheme could begin. People in MoPEP member towns were about to discover the meaning of indentured servitude. the contracts represented as collateral to borrow $5 million from First National Bank & Trust Company in Columbia to finance the development costs of MJMEUC’s planned ownership interest in the Prairie State Energy Campus project in Illinois. In October 2005, they opened a second line of credit for another $5 million from UMB Bank to finance their ownership shares in the Iatan Unit 2 project in Platte County. In early 2006, similar stock purchases were made in the Plum Point project in Arkansas. Missouri and so it went plant after plant, lines of credit, bridge loans, “tenants in common” deals and contracts, each one tying rate payers in the MoPEP towns to punishing terms and conditions that they were entirely unaware of. The $10 million in two lines of credit was to cover the mega-millions in “development” or start-up costs of each of these plants. Those costs are also “unlimited,” if someone screws something up the owner/stockholders (that’s you now) pay for any and all cost overruns and delays in construction, litigation, strikes etc. *(source: MJMEUC audit '04-'05)

Right now the principal and interest on the $10 million loans to cover the “development costs” is what is being added to your electric bills plus of course, all of MJMEUC’s expenses down to the last paperclip. If the MJMEUC board members decide to buy themselves a million dollar office building or have their next meeting in Hawaii, there is nothing in the contract to prevent them from doing so and throwing the bill for their trip into the “direct cost” pipeline for you to pay. The revenue bonds that have been issued in MJMEUC’s name - using you as collateral - will pay for the actual construction of the mostly coal-fired plants but any cost overruns of these multi-billion dollar projects will be added to your electric bills. Even after the plants are ready to operate there are back-end costs that are not covered by the bonds and…here’s the worst part…if these plants are badly managed and lose money in the volatile energy market the results will be devastating for all the people in small towns who are saddled with this incomprehensible burden of debt.

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Glossary

"Joint Municipal Utility Commission Act." RSMo Chapter 393.700 – 393.770. The laws that turned MJMEUC/MoPEP contracts loose on the unsuspecting public in 2002. They were subsequently amended until in 2007 they - and the MoPEP contract they spawned - became truly lethal. Thanks to our state legislators for paying no attention to what they were voting on and what it was really doing to our ‘naked’ small towns and their monopoly detainees that are denied PSC protection.
MJMEUC debts: MJMEUC debts and MoPEP debts are the same because MJMEUC and MoPEP are the same. Of the 60 MJMEUC members only 35 have also signed the MoPEP contract - the rest must have read it first. The remaining 25 MJMEUC members that were smart enough to NOT sign the MoPEP power contract probably think they aren’t part of the mega billion investment mess and that their cities are not liable for the MJMEUC debt. Are they ever going to be surprised!
MoPEP contract: (the “Amended and Restated Missouri Public Energy Pool #1 Agreement Among Missouri Joint Municipal Utility Commission and Pool Members”) One of the worst Trojan contracts of the 21st century. It is not, as represented by MJMEUC officials, a routine industry-standard commodity contract to provide allegedly cheaper or “stable” power due to MoPEP’s alleged “economies of scale,” it is actually a device to feudalize small towns and turn them into a “collateral farm” so MJMEUC can, without the knowledge or consent of these electrical serfs, pledge their collective electric revenues to leverage MJMEUC’s first $10 million bank loan into $2-plus Billion in revenue bond debt. The $2-plus Billion in revenue bonds was used to purchase equity ownership in five power plants being built in the Midwest. Equity investments are illegal for all Missouri political entities.
MoPEP No 1 captives: Albany * Ava * Bethany * Butler * (Campbell escaped!) Carrollton * Chillicothe * El Dorado * Springs * Farmington * Fayette * Fredericktown * Gallatin * Harrisonville * Hermann * Higginsville * Jackson * Lamar * LaPlata * Lebanon * Macon * Marshall * Memphis * Monroe City * Odessa * Owensville * Palmyra * Rock Port * Rolla * Salisbury * Shelbina * St. James * Stanberry * Thayer * Trenton * Unionville * Vandalia. (35 as of 10/10)
MoPEP: The Missouri Public Energy Pool #1 is merely a “project” of MJMEUC, not a separate corporate entity. MoPEP is a window-dressing committee formed ostensibly to set electric rates. The “project” has even less power than a corporate affiliate or empty shell but the “project” serves to prop up the illusion that the MoPEP member cities have control of their power rates. Utility managers, and city officials or “Pool Members” who take the pro forma votes aren’t aware of their impotence. If they had bothered to read their MoPEP contracts they would have seen that MJMEUC has all the power and all the rights in the contract and MoPEP committee members have nothing but obligations to MJMEUC. Note the chilling designation of #1, signaling that there will be clones of this unnatural thing.
state audit hell: What you’re living in if you’re a city manager or mayor and the State Auditor - in the petition audit forced upon you by angry citizens – publicly yanks your pants down for covering up your financial mismanagement by inflating utility rates and raking off hundreds of thousands or millions of dollars to subsidize your misfeasance. And after all that agony…you still have to pay the audit bill.
“direct costs:” Arguably the most poisonous provision in the MoPEP contract and the key to dumping all MJMEUC’s financial obligations onto MoPEP members along with their power bills. Direct costs are defined on page 3 as: “All costs MJMEUC incurs in connection with acquiring, providing, arranging or financing the provision of Services hereunder, including without limitation all payments MJMEUC is required to make (including reserves and debt service coverages MJMEUC is required to maintain pursuant to any bond indenture, financing lease or loan agreement) under contractual and/or financial commitments and obligations entered into by MJMEUC in order to procure, deliver, or finance resources intended to provide Services, without regard to whether any particular resource is available to or used by any particular Pool Member….” The “without limitation” part on page 3 is where cities should have stopped reading and moved on to discuss relining their sewers.
“going bare:” What you feel you are doing when you live in a rural town in Missouri that has a city utility but unlike the favored Missouri citizens who live in big cities you have no Public Service Commission protection to keep you from being gouged by uncontrolled and unlimited utility rates.
“joint venture:” What State Auditor Susan Montee said in the Rolla and Marceline petition audits about the MJMEUC/MoPEP organization’s debts and liabilities may be “…pursuant to Governmental Accounting Standards Board statements, it appears the relationship between the RMU and the MJMEUC/MoPEP may be a joint venture. Additionally, joint venture participants must disclose specific information including information regarding ongoing financial interest and/or financial responsibility and information to evaluate whether the joint venture is accumulating significant financial resources or causing a financial burden on the participating government in the future.” -Montee, Rolla audit 2009
“Marceline Migraine:” What you get every time you open your electric bill if your city government is too chicken and too lazy to ask voters to raise property or sales taxes to support essential city services but instead they keep playing the “pump ‘n skim” game with electric rates. The Poster City for this is Marceline Missouri that has abused their monopoly hostages until the electric rate is 15.35¢ per kilowatt and 63% of the city budget comes from illegal utility overcharges.
“pump ‘n skim:” What your city government (utility board) does when they contract for power from a commercial wholesale source then pump up the kilowatt price far higher than needed to run the utility department so they can covertly “skim” a few hundred thousand or a few million a year to subsidize their mismanagement in other city operations or fund pork projects for their cronies.