Ratepayer Risk: New Study, Internal Docs Show AMP Electric Costs Spiraling

Giant Ohio Coal Plant Price Nears $3.5 Billion; Other Financial Risks Loom

COLUMBUS, OH (February 14, 2008) - Homeowners and businesses in Ohio could find themselves on the hook for soaring electricity costs and stuck with mounting financial liabilities associated with a giant new power plant in Meigs County. That is the finding of a new report released today on the financial impact of an American Municipal Power (AMP) pulverized coal plant that would sell power to utilities in more than 70 communities across the state. Additionally, an AMP document obtained by NRDC via a public records request confirms that the cost of the plant is skyrocketing and has increased $400 million over the last seven months alone.

"$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 Instead all they are giving you is a dirty plant running on outdated technology," said NRDC staff attorney Shannon Fisk. "They can do far better before tapping into ratepayers' wallets for the next 50 years. The new AMP documents confirm what we have been saying all along -- this plant is a large financial risk that will burden ratepayers who will be forced to pay the costs for decades to come."

New Analysis Reveals Mounting Financial Risk

Respected research firm Synapse Energy Economics has released a report that spotlights the real and rising costs of the plant. The report outlines the significant risks involved with investment in a conventional coal plant in today's volatile energy landscape. It also notes considerable concerns over AMP's 50-year contract term, rising construction costs and global warming emissions, as well as the value of pursuing cleaner alternatives to coal.

Significant findings include:

Construction costs for this plant are growing at an alarming rate. AMP's price estimates have risen by 180% in just over two years. The initial estimate came in at $1.2 billion in October of 2005. By May of 2007, the estimate had ballooned to $2.7 billion (including financing). One month later, the estimate grew another $200 million. And according to AMP the current estimate has moved up to $3.39 billion. AMP's contract pushes these price increases back on municipalities and rate payers.

CO2 cost estimates are not accurate. AMP agrees that new rules limiting heat-trapping carbon dioxide pollution will likely be in place by 2012. They estimate the cost of addressing their global warming emissions at around $73 million dollars for the 7.367 million tons of CO2 that the plant will emit annually. Synapse offered low, mid, and high-level estimates. At the mid-level, Synapse estimates a cost of $287 million (nearly 300% more than AMP). And at the high-level, Synapse estimates a cost of $500 million (a 580% increase over AMP's numbers). Due to AMP's "take and pay" contract, rate payers are likely to be stuck paying for those increases.

Cleaner and more efficient technologies are coming online and should be fully evaluated in order to avoid and minimize the financial risks posed by the AMP coal plant. These alternatives include energy efficiency and demand-side management programs, renewable resources, purchasing or contracting for energy and capacity from underused natural gas-fired power plants in the region, and, if necessary, building new gas-fired capacity. A portfolio of these alternatives would offer more flexibility and would limit municipal members' exposure to the coming federal regulation of greenhouse gas emissions.

"The energy landscape has shifted to cleaner technology and escalating costs make betting on this plant for the next half century look pretty scary," said NRDC staff attorney Shannon Fisk.

Full document is available here: Synapse Study on AMP Ohio Coal Plant (PDF).

Internal Report Underscore Rising Risks

Through a Public Records Request NRDC has gained access to a redacted version of an updated AMP feasibility study. While significant information is blacked out, the document does include some very significant details:

The document confirms plant opponents' concerns about growing construction costs. As noted by Synapse, the prices have increased dramatically, from $1.2 billion in October 2005 to nearly $3.4 billion (with financing costs) - an increase of more than 180 percent - in less than 30 months.

AMP concedes 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 has redacted their projected coal prices. But just 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 through the environmentally destructive method of mountaintop removal. AMP has so far refused to commit to not using coal mined through mountaintop removal.

"The company's own internal documents confirm what ratepayers and municipalities have been worried about for months. Ratepayers around Ohio are going to be stuck paying too much for electricity that is too dirty and too expensive for their needs. This plant will be a giant step backward for the entire state in the new energy economy," said Andrew Wetzler, director of NRDC's Columbus Field Office. "The energy landscape has changed. Instead of recognizing the issue, AMP is asking more than 70 Ohio municipalities to lock into a 19th century technology for the next half century. We can do better."

"This is a bad deal," said Fisk. "Municipal governments should look closely for better alternatives rather than locking themselves in to a dirty coal plant for the next two generations."

Click here for the full document.