Traverse City Record-Eagle

Archive: Friday

January 17, 2014

Editorial: Plant decisions must start with financial basics

It’s encouraging that the Traverse City Light & Power board is approaching the issue of building a local power generation plant as if they’re dealing with their own money.

That attitude must set the tone for all future power plant/power purchasing conversations.

Members told Tim Arends, L&P’s executive director, that they want to see financial numbers to support the contention that buying power from larger, 600- to 750-megawatt generation plants is more economical than building a small, 30- to 50-megawatt natural gas-burning plant because of economies of scale.

While financial considerations can’t be the only basis for a decision, they must be the bedrock on which all decisions are made.

This is more than an academic exercise. One of Light & Power’s major power purchase agreements expires next year, and the utility must notify the seller by Oct. 1 if it doesn’t plan to renew its agreement.

Arends asked board members to give staff some direction on which way they might be leaning: toward creating a local generation plant; or continuing to purchase power on the open market.

Board member and city Commissioner Barbara Budros said she has often heard the economy-of-scale argument but without any figures attached. “Now, I’ve never seen any numbers,” she said. “I don’t know if that holds water, but if that’s the case I’m not in favor of local generation.”

Hopefully, the insistence on first getting some solid financials may also mean board members are ready to look at the issue from other than an either/or position. Buying or building can’t be the only options the board considers.

Other possibilities might include partnering with other small utilities to build a larger natural gas plant than one L&P could take on by itself, or creating a partnership to build a large renewable energy facility of some kind, be it solar or wind or some other option, or to buy into an existing operation. Renewable energy technologies are expensive, but the fact that there are never any fuel costs and that ratepayers aren’t at the mercy of fuel providers may alter the equation.

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