A $133 million bond issue for Board of Public Utilities’ air quality control systems was approved at the Unified Government Commission meeting Dec. 10.
The air quality controls at the BPU Nearman plant will cost the average BPU customer an increase of $1.18 a month starting in 2016, BPU officials said.
While the UG Commission two years ago approved or authorized up to $250 million for the financing of air quality control systems with the existing plants, the project was done in two phases, and this is the second phase, according to officials. The BPU board unanimously approved the second phase of the bond sale on Dec. 2, 2015.
Lew Levin, UG chief financial officer, said the project funding would not exceed $125 million, and the true interest cost would not exceed 4.6 percent. He said the 30-year financing would have a fee of .53 percent, less than one percent, for the underwriters.
BPU General Manager Don Gray said originally this phase was to have cost $140 million, but it is coming in ahead of schedule and under the estimate. Now $125 million remains to complete the project.
“This is a savings to the community of $15 million,” Gray said.
The BPU is putting in air quality controls at the 235-megawatt Nearman plant, he said. The BPU is responding to federal mandates concerning air quality, as are other utilities in the area that are making substantial investments in air quality systems for their plants, he said. The Environmental Protection Agency has mandated that all utilities comply with new air quality control standards, Merucry and Air Toxics Standards, to reduce sulfur dioxide compounds, mercury and particulates in the air, he said.
This work should be completed by February of 2017, Gray said.
The BPU decided to invest in air quality controls in the Nearman plant because it still has more than 30 years of useful life, and because the coal price is stable when it is compared to natural gas prices, he said. Also, coal can easily be stored on site, which is not the case with natural gas, he added.
Having coal along with the other fuels, including natural gas, hydro, wind and landfill gas, keeps the generation of electricity diversified, he said. The BPU will maintain better control of its generating costs, he added.
Gray said it is a favorable time to be in the bond market, and it supports energy reliability for the community.
The project was split into phases to spread the costs out, reducing costs to customers, so they would not hit at one time, according to Gray.
The construction site was developed starting last November, and in May, contractors, who are all union contractors, started installing piles and foundations, he said. They have begun erecting structural steel. The air quality control equipment is expected to start in November 2016, with testing of equipment until February 2017.
The cost of the air quality control system will be passed directly to the BPU customers through an environmental surcharge (ESC), Gray said. During 2016, monthly bills for the average residential customer will increase $1.18 a month. In 2017, the ESC is estimated to increase $2.25 a month for residential customers, he said. This is based on 858 kilowatt hours as an average residential usage amount.
In 2018 there will be another similar increase to customers’ bills to pay for air quality controls, to continue to spread the costs as much as possible and lessen the effect on the community, Gray said.
When federal or state regulations come out, the BPU has no control over what the EPA or state directs, so the BPU board decided to pass the cost directly to consumers, he added.
This bond issue for BPU air quality controls was just one of several bond issues approved Dec. 10.
Also approved Dec. 10 were Public Building Commission bond issues to refinance the BPU headquarters building at 540 Minnesota Ave., at $7.25 million; as well as financing of bonds up to $750,000 for the Cricket Wireless Amphitheater in Bonner Springs; and the acquisition of real estate at 800 and 810 Ann Ave. with bonds in the amount of $1.83 million for the construction and furnishing of the UG’s medical clinic.