Traverse City Record-Eagle

January 16, 2014

TCL&P leans away from local generation

Traverse City Record-Eagle

---- — TRAVERSE CITY — Traverse City Light & Power board members don’t show much interest in building a local, fossil-fuel-burning electric generation plant — unless someone can prove to them it’s cost-effective.

One of the utility’s major power purchase agreements expires in 2015 and TCL&P must notify the seller by Oct. 1 if it doesn’t plan to renew its agreement. Tim Arends, TCL&P executive director, asked board members during a meeting this week to give staff some direction in which way they might be leaning: toward local generation or purchasing power on the open market.

“We have in 2014 a big decision to make,” Arends said.

Utility consultant Bob Dyer, of Florida-based RTD Consulting, LLC, said a survey of board members showed no great desire to own a power generation facility. Board members at this week’s meeting remained open to local generation if someone could show them it was more economical to take that path.

Board members repeatedly have heard it’s cheaper to buy power from larger, 600-megawatt to 750-megawatt generation plants than build a small, 30-megawatt to 50-megawatt natural gas-burning plant because of economies of scale.

“Over the last year I’ve heard three times from various people that we will never be able to justify local generation economically,” said utility board member and city Commissioner Barbara Budros. “Now, I’ve never seen any numbers. I don’t know if that holds water, but if that’s the case I’m not in favor of local generation.”

Board member Bob Spence said he agreed with Budros. He too would like to see some financial numbers to support the contention that buying power is cheaper than building a plant.

But some board members indicated they might support local generation even if it was slightly more expensive, if it would create jobs and offer local control, Arends said.

Board member Jan Geht said some board members would consider local generation if the cost was within 10 percent of the price of a purchased power agreement. He told Arends and Dyer the board would rather first see financial numbers to potentially streamline the conversation.

The problem with producing cost numbers is that 30-megawatt plants generally aren’t built only to produce electricity, Dyer said. Most small plants are of the co-generation variety, meaning they may produce both heat and electricity.

Arends said he met with Dyer on Wednesday and they will be able to come up with some financial comparisons to allow board members to make a decision.

“I think the difference is going to be significant,” Arends said.