BPU approves $62 million bond issue for utility improvements

by Mary Rupert

A $62 million bond issue was approved tonight by the Board of Public Utilities.

In addition to nine projects to be funded with the $62 million utility system revenue bond issue, the BPU also will refinance an earlier bond issue from 2009 of $47.6 million, for a total of around $110 million, according to Lori Austin, BPU chief financial officer.

The BPU is expected to achieve a cost savings by refinancing the 2009 bond issue, she said.

The nine projects for the $62 million bond issue include:
• Nearman 1 Boiler Tube Improvements, replacing the boiler tubes at Nearman Unit 1, $10 million;
• Rosedale Substation, replacing the existing substation, $29.5 million;
• Fiberglass Substation addition, adding a third distribution transformer and switchgear to serve load in the Fairfax and downtown area, $2.8 million;
• Muncie II Substation, a new 161kV substation to replace the existing Muncie substation, $4 million;
• Kaw West Substation addition, add a second 15kV switchgear to the Kaw West Substation, $3.5 million;
• Downtown Underground 15kV Rebuild, modernizing the 15kV underground electric system in the downtown area, $1.5 million;
• Electric Distribution Feeders, replace aging 15kV distribution infrastructure as well as improve switching capabilities between stations, Piper, Muncie, Wolcott, Fiberglass, Legends, $5.7 million;
• Electric Transformers, overhead and underground, purchase overhead and underground distribution transformers to support system restoration and improve service reliability, $3 million;
• Electric Infrastructure for city street projects, $2 million.

“The market’s been pretty stable,” Austin said. There have been a few questions about the market as the Federal Reserve hinted it might raise rates, and there is an election in November that may lend a little uncertainty to the bond market.

Next, the BPU bond issue resolution will go to the Unified Government for approval, Austin said. It is scheduled Oct. 10 before a UG Standing Committee, and Oct. 13 at the full UG Commission meeting. If it is approved, bond pricing would be in November.

The bond issue resolution was approved 5-0, with 1st District board member Bob Milan Sr. voting “yes with reservations.” He said it was a tough decision. Board vice president Jeff Bryant said the bond issue was “a very good move.”

Dogwood natural gas plant has profitable summer

The BPU heard a report about the Dogwood natural gas plant in Missouri, where the BPU owns about 17 percent of the plant.

Jerry Ohmes, BPU acting manager of electric supply, reported that the Dogwood plant showed a profit in June and July and may show one in September. The August profit was offset by a quarterly payment due that month, he said. There is a planned outage for work in November.

While overall profitability of the plant this year is still behind from the first quarter, the recent months have shown a turnaround, according to BPU officials.

2 Degrees 2 Save program to be discontinued

Ohmes said the 2 Degrees 2 Save program would be discontinued.

Under the program, BPU customers could receive a programmable thermostat when they signed up for the program, which allowed the utility to shut it off during peak periods. For example, a home could be cooled for some hours prior to a four-hour shutoff during the peak period. The thermostats were 5 to 15 percent more efficient than manual ones, he said.

The program received some federal Department of Energy funding, as well as other program funding, and the program and reimbursements ended in December 2015, Ohmes said. This funding reimbursed about one-third of the program’s overall cost, he added.

The BPU has 351 customers participating in the program, which was less than the expected amount, he said. The number of participants results in about 800 kilowatts of relief, less than 1 megawatt, Ohmes said. The program’s initial estimates were that the BPU could receive 6 to 10 megawatts of relief, and that was never achieved, he said.

When the program began, the BPU was in the Energy Imbalance Service (EIS) market, with volatile and skyrocketing prices, Ohmes said. Now the BPU is in the Integrated Marketplace, which does not see such large spikes in the energy prices, he said.

With the 2 Degrees 2 Save program, the BPU would save less than $90 this summer during peak periods, which doesn’t begin to cover the cost of the program, Ohmes said.

The installer’s contract for the program ends Dec. 31, he said.

Because of those factors, the end of the reimbursement, the low customer participation level, and the new market that the BPU operates in today, the BPU has made the decision to discontinue the program on Dec. 31, Ohmes said.

Customers in the program will be notified. They will be able to keep their thermostats, but the automatic shutoff during peak periods will end, he said. The BPU still had about 130 thermostats on hand that it would have used in the program, he added.

Joint meeting with UG on Leavenworth Road improvements

A few UG elected officials and a few BPU members are scheduled to have a joint meeting along with staff on Thursday, Sept. 22, about Leavenworth Road improvements. The UG Commission had decided that all utilities should be worked on at the same time as the road improvements on Leavenworth Road, and to bury the utility lines underground. They reasoned that the road would not have to be torn up again later for utility improvements.

Some BPU members, however, are concerned about the cost of the underground utility work. They are asking why and who will pay for it, the BPU or UG.

During the board comment section of the Sept. 21 BPU meeting, Milan said he was concerned about what effect the $62 million bond issue resolution will have on the Leavenworth Road improvements. The BPU might have to come back to get more funding for the Leavenworth Road improvements, he said.

“If that’s the case, how many times can you go to the well?” Milan asked. He wondered how much more funding they would need if they had to deal with Leavenworth Road improvements.

“I’m just concerned about how many times we float a bond, that may not be in the best interests of the board,” Milan said.

The next BPU board meeting is being moved to Tuesday, Oct. 4, at the same time, because of scheduling conflicts for some members.