Thursday, May 17, 2012

To meet environmental regulations, UG approves $80 million in bonds for BPU


In a divided 6-3 vote, the Unified Government Board of Commissioners voted Thursday to authorize $81 million worth of bonds to help the Board of Public Utilities purchase a 17 percent ownership interest in the Dogwood Energy Center.

Located in Cass County, Missouri, the plant will be providing natural gas for the BPU, along with helping the utility meet regulations demanded by the Environmental Protection Agency.

The plant has a nominal capacity of 650 Mw and under the agreement passed tonight, BPU will be able to acquire up to 17 percent of the available energy.

BPU General Manager Don Gray said purchasing a partial ownership of the plant was a necessity.

"We're going to have a real challenge in making it through the year without this," Gray said. "The State of Kansas was just included in the regulation only a year ago."

The sticky point in the discussion is the Cross State Air Pollution Rule (CSAPR), which attempts to phase out coal production. The law was put into effect on July 6, 2011. However, when it was initially announced years earlier, Kansas was not included in the initial set of states required to adhere to it.

Instead, Kansas was only placed on the list last year, giving the state's utilities under a year to adjust to CSAPR.

Still, voting on a $81 million Band-Aid wasn't ideal for commissioners.

"Dogwood isn't a complete solution," said Commissioner Brian McKiernan. "It makes me nervous."

Despite the nervousness, McKiernan joined five other commissioners in reluctantly approving the bonds. Three commissioners did not - Ann Murguia, Angela Markley and Nathan Barnes.

"It's a concern for me that we're only purchasing a share," Markley said. "We are only purchasing 17 percent."

Without approving the agreement, Gray said the BPU would face significant fines and the possibility of not having energy to purchase.

Commissioner Mark Holland, like McKiernan, voted to support the measure because he believed there was no other solution.

"It's not just BPU, it's happening across the nation," Holland said. "These regulations are a disaster."

The process of including Kansas and the result has done something few issues do - unite politicians.

Unified Government Mayor/CEO Joe Reardon, a Democrat, and the entire Republican Kansas Congressional delegation have spoken out against the timeline in relation to enforcing the CSAPR regulations in Kansas.

In submitting a letter to the EPA, U.S. Rep Kevin Yoder (R-KS) requested the agency to give Kansas more time to fall in line with the regulations.

"Burdensome regulations such as this will result in utility fee increases for customers across our state," Yoder wrote. "High gas prices and the high unemployment rate are enough signs already that our economy is still hurting. We want our air to be clean, but we ask the EPA and Administrator (Lisa) Jackson to allow Kansas the same amount of time to comply with these rules as other states."

BPU has joined other utilities in a lawsuit against the EPA regarding the CSAPR regulations. It's currently in the U.S. Court of Appeals.

Right now, ratepayers will not see an increase in rates as a direct result of purchasing the energy from Dogwood, according to Gray.

"This $80 million is already built in," Gray said. 

However, the bad news is BPU is still on the hook for over $200 million in the next few years in capital improvements as a direct result of EPA regulations.

The future dollar amount has Reardon concerned.

"BPU has never had a five-year stretch of these investments," he said. "These are absolutely huge capital investments. Rates are going to have to go up in the future."

Reardon and several commissioners called for more communication between the UG and BPU.