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The realities of a 50-year contract

John Eaton
My Turn

The heated debate over the merits of the 50-year contract for coal-fired power has been aggravated by significant misinformation. Reading the contract is highly enlightening and I recommend it.

Claim: The contract will lock in low rates for 50 years. Reality: We are being offered a teaser rate like the creative financing that fueled the housing bubble. Like a “pay what you want” mortgage, this contract will come back to bite us.

As Mr. Douglas Hunter of Utah Associated Municipal Power System (U.A.M.P.S.) said last Wednesday night: “there is no cap” on what we can be charged for their electricity.

The contract lists 20 reasons why they can raise prices, and in fact there are even more that are not mentioned. You can be sure they will use these reasons to their best advantage. In addition, if the plant is started and not completed we will be responsible for our share of the bond payments for the full 50 years, even though we get no electricity. If another participant defaults, we can be made responsible for a share of their expenses.

Global warming due to carbon dioxide is here, and it will only get worse. Coal is an inefficient fuel, generating more carbon dioxide per kilowatt-hour of electricity than natural gas. Probably in the next decade, almost certainly in the next two decades, there will be serious financial penalties for using coal, which will drastically increase our rates.

For all these reasons, under this contract, your rates will go up as fast or faster than a series of shorter contracts. Fifty years of risk is not a wise decision.

Claim: If it doesn’t work out, we can sell the contract. Reality: This will not be easy. U.A.M.P.S. requires four months notice, and can then spend another 45 days looking for a buyer among the other participants. After that, they can also spend another four months approving any prospective buyer we have been able to come up with. We will be bleeding money throughout this process, and will very likely have to pay somebody a lot of money to take the obligation off our hands. Remember Idaho Power?

Claim: The technology in this plan can be updated. Reality: This is at least partially true, but your rates will be raised to pay for it.

Claim: Little “green” energy is available at the present time. Reality: This is true, but more will be available in 10 years and much more in 20 years. We can’t even imagine the technology that will be available in 40 years.

Truckee Donner Public Utility Board President Ron Hemig said he would like to find a collaborative solution.

So would I, and here is my suggestion: Form an advisory group, like the Airport advisory board, composed of people concerned about rates, people that know about green power, and representatives of the PUD board and staff. This group will provide concrete recommendations about how the PUD can take action to make a transition from black to green energy. In the meantime, enter into a series of the best available 10-year contracts, generating less carbon dioxide with each.

Rather than fighting with one another, lets get together and solve this problem.


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