During Wednesday’s U.P. Energy Summit, a SEMCO representative said that there was no firm guarantee that they would be able to supply enough natural gas for expanded operations in the Upper Peninsula.
That is a big blow to the Board of Light and Power, who are finally ready to unveil a $65 million natural gas power generating facility. They’ve been working on it most of the summer and are finally ready to go to the Marquette City Commission and ask for what they need to move forward.
That would be a 30 percent rate increase on all power. If approved, the increase would begin in October 2016.
Paired with previous rate hikes in the last few years and inflation, the rate of power would be increased by 70 percent since 2010.
The new facility is necessary according to the BLP, citing reliability issues. Their primary reasoning for going with this plan is to more quickly turn the power back on after an outage, using three new power generating machines from a Finnish company that is used by communities and college campuses across the country.
About $100,000 has already been approved or spent on tests to provide more accurate data for the building by Sargent & Lundy, which beat out other proposed bids. Some of those bids were cheaper and some of them included green energy options.
Most of these tests have been monitored by BLP staff — non-elected employees of the utility company. Chairman of the BLP elected board John Pierce said that he supports the increase because of the BLP employees that are pushing it.
“We trust our staff and they have come to us when they’ve done their homework,” Pierce said. “I won’t hesitate to vote on their recommendation.”
Initial reaction to the proposed rate included disappointment, anger and futility. Marquette Area Public Schools Superintendent Bill Saunders said that the last run of increases have already demanded action in the schools.
“We’ve had to make some changes and be more conscientious as far as our electrical usage goes,” he said. “We have already made a lot of improvements as far as lighting goes, but were still trying to figure out how to reduce all the utilities we use. Its definitely a focus for us.”
For School Board President Rich Rossway, that may be too much focus — and tens of thousands of dollars — away from actually teaching the students.
“Bottom line is MAPS will suffer, our students will suffer and the board will have to implement further cost-cutting measures to absorb the increase,” Rossway said.
Parks and Recreation Coordinator Andrew MacIver said that an increase in power paired with aging infrastructure would lead to higher prices that the public couldn’t afford.
“If demand for ice and other services at Lakeview begins to slide, there would be a major reduction that could lead to potential closure if deemed necessary,” MacIver said.
Jason Schneider, Executive Director of the Marquette Chamber of Commerce, said that it will be a challenge for the community as it teeters between the need for power reliability and price increases that may be too high to handle.
“This issue is complex because we are seriously restricted to access to the power grid,” Schneider said. “It can help the community by expanding our power generating ability and resilience to fuel prices. I also think that many business will feel the pinch of a price jump.”
Despite initial pushback on the increase, it is a better plan than other financing options according to BLP staff. Some other options would include a $7 million credit line, which would have to be cosigned by the city since the BLP doesn’t have the collateral. A signing like that would drop Marquette’s AA credit rating at least two credit ratings according to an official in city hall who asked to remain anonymous.
The 30 percent increase didn’t come out of nowhere, but rather from a group called Utility Financial Solutions. The BLP has used this group in the past to go over previous financial issues and both staff and elected officials were confident in their services.
Pierce said that the elected officials didn’t listen to UFS previously, and that they believed it was a mistake to do so.
“Talking with (former BLP chairman) Ed Angeli, he said that he didn’t listen to UFS in the past with the rate increases and it hurt us,” Prince said.
This is the second largest rate hike in BLP history, as the board raised it 43% in the 80’s to construct the Shiras Hills operating plant. The rate stayed the same for about 20 years before the city commission approved an 8.5% increase for 2013, 2014 and 2015.
If the increase for 2016 goes through, UFS also recommended another 4.5 percent increase for 2018 and 2019. The BLP however decided to not ask for those increases in case it needed to be changed.
The BLP has scheduled a work session with the city commission on Monday, October 5 at 5:30 p.m.. It will be located at the BLP office at 2200 Wright St. and will be open to the public.