MORGAN CITY, La. — A new power plant serving 10 cities is expected to be in operation on Youngs Road in Morgan City west of the Joseph P. Cefalu Steam Plant by 2015, but several steps have to be taken before it becomes a reality.
On Tuesday night, the City of Morgan City took one of those steps by passing a resolution of support for the project from the Louisiana Energy and Power Authority, a project which cannot become a reality without the support of nearly all of the participants.
Mayor Tim Matte, who is a member of LEPA’s board of directors, said LEPA is asking cities to make resolutions in support of the project.
“The reason they’re asking for this is that if for some reason one of the cities decided that this wasn’t in its best interests and pulls out, then something has to happen to that increment,” he said of the power load for each city and the cost for each load. “You can’t resize the transformer. We’d have to find someone else willing to take it.”
The nine other municipalities involved in the 64-megawatt, $1,750,000 plant are New Roads, Plaquemine, Rayne, Vidalia, Welsh, Abbeville, Houma, Jonesville and St. Martinville.
Morgan City’s participation in the project is 10 megawatts at $268,354, second only to Houma’s expected purchase of 22 megawatts at $601,563.
The plant is being built here because Morgan City and Houma have been “traditional transmission constraints” due to the lack of existence of major settlements south of the U.S. 90 corridor, Matte said. “By putting generation here, we’re going to be in a better position to stabilize the grid. That opens up more opportunities.”
The new plant would more easily allow for the eventual replacement of the current Cefalu steam plant, Matte said, but that it would not immediately replace it.
“One of the major assumptions is that Plaquemine’s steam plant, Morgan City’s steam plant, Houma’s steam plant, all of those still are able to provide the resources,” he said.
Matte later said that buying its 10 megawatts “is a step forward toward retirement of the steam plant,” but that the two could easily co-exist for a decade.
“The fact that the new power plant is constructed here puts us in a position where we can make the decision going forward as to what the value of the existing power plant is,” he said. “We won’t be locked into having to keep a power plant that is too expensive to operate because we don’t have another choice. There’s a day coming when that power plant will have to be retired.”
The land where the new plant will be built is owned by the H&B Young Foundation and is under a long-term lease to LEPA.
“The interconnection agreements and transmission agreements that are needed in order to tap into the grid are expected to be completed by March 2013,” Matte said at Tuesday’s council meeting. “That information has been submitted, and there has been an exchange of information between LEPA and Cleco.
“The next major step once that’s complete will be the actual awarding of contracts for major equipment and the engineering and procurement of the plant itself, and that’s expected to take place in July and August of 2013,” he said.
Funding for the project needs to be procured before next summer, he said.
“So, actual issuance of bonds would have to be in hand before we place these orders. In order to get to that point, we’re going to need to develop the power sales contracts that will support this acquisition, and those contracts will have to be circulated among the 10 participating cities,” he said.
“We’re looking at a $134 million bond issuance, and the annual debt service would be $7,612,000,” he said.
Matte said that the cost of electricity is just as important a consideration as cost of construction of plant and that the hope is that electricity prices will stabilize once the new plant is built.