RANTOUL- A group of Illinois communities are in the process of investing in a proposed coal-fired power plant in Kentucky.
The Illinois Municipal Electric Agency is an organization made up of 40 cities and villages, including Rantoul and Farmer City, that run their own electric departments.
The association already owns 12.12 percent of a power plant in Trimble County, Ky., (near Louisville), according to Agency General Manager and Chief Executive Officer Ron Earl.
Elected officials and representatives from those 40 communities will converge at 6 p.m. Wednesday at the Caddyshack Restaurant, 1126 Country Club Lane, Rantoul, to learn about and discuss a proposal to pay for 12.5 percent of a second power plant in Trimble County.
?It's going to be a new stand-alone power plant that would be located next to the existing plant,? Earl said.
While the entire plant is expected to cost $1 billion, Earl said the agency's share will be $136 million, plus another $14 million in financing costs.
The plant would be paid for by bonds issued by the agency. While the individual communities won't be directly paying off those bonds, they will be making indirect payments by buying electricity from the agency.
Earl said Rantoul buys 10 per cent of the agency's electricity, with Farmer City buying another 1 percent.
Other power providers, including the Indiana Municipal Electric Agency, are expected to invest in the new plant, which is expected to come on line in 2008. The primary investor is a Belgium firm, E.ON Energie.
?I think this is a good idea for long-term stability for our power supply and our rates,? said Rantoul Public Works Director Greg Hazel.
?This new plant is a way to keep our energy costs down, and it's a good source of power,? said Farmer City Electric Superintendent Rick Hardesty.
While many of the group's members, including Rantoul and Farmer City, own their own power facilities, the vast majority of municipal electricity originates from the existing Trimble County plant.
Earl said Trimble County provides what the electric business calls ?base load? electricity, which supplies the bulk of the participating communities' needs.
When extra power is needed, the agency purchases what is called ?intermediate load? electricity from private companies, such as Ameren CIPS.
?We have multimillion-dollar contracts with Ameren and other energy companies for power delivery,? Earl said. ?But that electricity is typically more expensive for us.?
For example, Earl said ?base load? electricity from Trimble County costs the agency $12 per megawatt hour, while ?intermediate load? electricity from an outside source costs $30 per megawatt hour.
During times of extreme electricity need, the agency calls on member communities to turn on their local generating facilities.
For example, Hazel said Rantoul only used its generators for two days a year each of the last two years.
?We did have to run our generator for 20 days three summers ago when the Midwest experienced a severe power shortage,? Hazel said.
But running those generators during peak times cost the agency $50 per megawatt hour.
Earl said the acquisition of a second power plant would significantly boost the agency's ?base load? capacity, meaning less reliance on outside energy companies for power supply.
While the current setup provides more than enough electricity to meet today's needs in the 40 Illinois communities, the agency wants to add a second power plant in anticipation of additional power demands in the next decade and beyond.
In addition, Earl said the country as a whole is expected to require additional electricity every year. With recent declines in the stock market, Earl said fewer private companies have available capital to build new power plants.
?In today's energy market, only a handful of companies are able to get the banks to loan them $1 billion for new plants,? Earl said. ?That's why it's important that agencies like ours pool our resources.?
As national power demand increases, Earl said he anticipates a major capacity shortage within six years if new construction fails to keep up with demand.
If and when that shortage comes, Earl said electric agencies that have ownership in power plants will be in better position to keep electric rates low than those agencies that will be forced to buy power on the open market at the going price.
?If we own our own plant, we can control our costs,? said Rantoul Village Administrator Gary Adams, who also serves as vice president of the agency. ?If we have to buy electricity from another company, we'll find ourselves at the mercy of paying whatever that company wants to charge.?
Hazel said the acquisition of a portion of the Kentucky plant will be an investment in assuring the independence of the Illinois Municipal Electric Agency and assurance to municipal electric customers that rates will remain stable.
?Electric rates are probably going to go up no matter what we do,? Earl said. ?By investing in this power plant, we're going to have a better chance of keeping those increases lower than what we would have to charge if we didn't have a second plant.?
Earl said the agency has hired an engineer, R.W. Beck of Indianapolis, to produce rate estimates for the participating communities. Earl said he expects Beck to unveil that information at Wednesday's meeting.
According to Adams, the agency board, which has a representative from each of the 40 participating communities, will vote in four to six months on a recommendation to proceed with purchasing a portion of the second Kentucky plant.
Then individual village boards and city councils will vote on the proposal. After a majority of association members agree to participate, the agency would proceed with issuing bonds for the project.
Earl said the member communities will also be asked to make a commitment to remain in the agency for another 10 years.
Right now, both Rantoul and Farmer City are in the midst of 35-year membership commitments that run through the year 2025.
By extending membership commitments through the year 2035, Earl said the agency can get bonds for longer terms.
?So when communities agree to this proposal, they are making a commitment to stay a part of the IMEA for another 10 years,? Adams said.