Decision Time for Lamar City Council on ARPA

Coal Domes

Coal Domes

As ARPA, Arkansas River Power Authority, representatives weigh their options on whether to place the Lamar Repowering Project in cold standby status or decommission the coal plant, the Lamar City Council sought suggestions for their next steps from residents during a public meeting Wednesday, July 2.  The ARPA board will meet to ponder and perhaps vote on their options during a July 31 monthly meeting set for Las Animas.  The city council hopes to have some concrete directives to follow before that point.  They will meet in executive session to discuss their options and perhaps take action following their special meeting,Tuesday, July 8.

Questions and suggestions from the 70 members of the audience centered on trying to negate the construction bonds without entering into a costly legal battle as is the case with ARPA member, Trinidad.  Trinidad is suing ARPA over mismanagement of the operation and the bonds insurer, Syncora, is suing the city over potential damages to the value of the bonds and breach of contract.  The construction bonds are insured, but only to $110M, for the $156M total.  It appears Trinidad is ready to settle for $600,000 from Syncora against a legal price tag of $1.7M, and they’ll still be obligated to continue to pay on the construction debt service as does each ARPA member.  They are:  Lamar, Holly, Trinidad, Springfield, Las Animas and La Junta.  Each community is represented by two voting members.  Lamar is represented by Lamar City Attorney, Garth Nieschburg and Lamar Light and Power Plant Superintendent Houssin Hourieh.

Another issue in the mix is the request from the bond insurer that all municipalities re-sign or make a statement of re-affirmation of the original organic contract that first secured the bonds.  Lamar doesn’t want to.  And right now, that looks like two votes to ten, as all other municipalities are indicating that they will sign, simply because they want to stop escalating costs.  Nieschburg told the audience they’d probably get the same vote if they tried to have ARPA declare bankruptcy on the project.  ARPA says some costs could be reduced if there is a vote to decommission the power plant and sell off all the equipment.  One area of rate stabilization would be to lay off all the employees working for the Repowering Project, about $1.2M a year in salaries and include the value of the sold equipment.  If the plant goes into cold standby, annual maintenance costs will amount to $14M over ten years, just for Lamar’s customers.  The hitch is that if Lamar votes to re-affirm the organic contracts, they will probably lose any leverage for a future lawsuit against ARPA.  Most communities aren’t too interested in taking on that burden.  No one showed up in either Holly or Springfield for a similar public meeting to discuss options and La Junta hasn’t bothered to schedule one according to Lamar Mayor, Roger Stagner.

Some options suggested included decommissioning the plant, but delay selling off the equipment until some other ideas come forward, sell the plant as a complete package to a third world country for a higher price, find a way to separate from the current ARPA contract, sue ARPA, vote to create a new ARPA-like entity to supply Lamar or other communities with electricity, remove Rick Rigel the ARPA general manager from his position, and force ARPA to delay a decommission sale until they’ve effectively restored the Lamar boiler and turbine to productive use.  The City of Lamar owned that unit which was taken out of service once the Repowering Project began.  Now, Lamar is without any form of backup power from a generating source.  Hourieh said a recent spring tornado damaged one substation south of Lamar, killing power to the city until it could be repaired.  The city had no back up unit to bring on line.

Each city pays a different rate for ARPA’s debt service on construction costs, based on how much infrastructure is provided to area residents.  Lamar pays the lion’s share at 30%, followed by La Junta. Board member’s votes are not weighted per monetary obligation, just one person-one vote.  A different electric rate is mentioned at almost every meeting.  Last Wednesday night had the cost of electricity set at 14.3 cents per kilowatt hour for Lamar.  Ten cents of that went to ARPA for debt service and electricity, two cents went to the City of Lamar and 2.3 cents is used to keep the plant in operation.  With principal and interest over the life of the bonds, the total cost of the project will amount to $344 million by 2045.  Lamar’s share of costs will be around $100M over 30 years.

If there is any remedy at all for Lamar customers, it will come through the courts.  Mayor Stagner said,”We’ve used three different legal firms, each taking a view of different parts of the bonding contracts.  The city has spent about $8,000 in fees so far and we’ve had the advice of Garth who serves on the ARPA board and is our city attorney.”  Other money is also being spent on legal services, as Lamar businessman, Doug Thrall, alluded to having received outside legal advice on the matter.  Thrall read to the audience, several sections of the ARPA contract which he believes would stand up in court in a suit over ending the bonds.  Some issues pertained to the ‘failed project’ of the Repowering Plant, other statutes stipulated that ARPA cannot legally sell any portion of the plant used to produce electricity.  How much of a financial risk would be borne by Lamar residents if the city council decides to pursue legal action is something that is being determined by the council during their Tuesday, July 8, executive session.  How much of a financial burden ARPA customers are being asked to assume for the next 30 years will also be a factor in their decision.

By Russ Baldwin

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