Paducah municipal power system's coal bet backfires
PADUCAH, Ky. (AP) - The Paducah municipal power system's big bet on coal has backfired, strapping local businesses and residents with soaring electricity rates.
Electricity rates surged to likely the highest in Kentucky, with residential bills in the western Kentucky city now about 60 percent higher than those of customers of the state's four main investor-owned regulated utilities, The Courier-Journal (http://cjky.it/1MiYvoN) reported.
The small public power system's mountain of debt was fueled in large part by an admitted over-investment in a coal mine and a brand new southern Illinois coal-fired power plant. Public outrage rose last fall when some customers were hit by surprise catch-up bills as high as $1,800.
What had been promised to provide affordable, reliable electricity for decades, the Prairie State Energy Campus near Marissa, Illinois, has turned into an economic nightmare with no long-term solution in sight.
"My bills have doubled since 2012," said leather works artist Phil Phillips, who lives and works in Paducah's LowerTown Arts District. "It's making it difficult for me to stay in business."
Some business leaders fear the utility's electricity rates and current $555 million in long-term debt, which amounts to about $25,000 per customer, have become an albatross for economic development, depressing property values and making it difficult to attract new industries.
"I can't imagine a bigger mistake that was made," said businessman Ronnie Goode, owner of Cole Lumber Co., with stores in Paducah and six other communities. While Paducah has invested hundreds of millions in a county across the Ohio River in Illinois, "we are dying on the vine," he said
The city's mayor, Gayle Kaler, has called the situation "probably the most serious problem for Paducah since the Great Flood" of the Ohio River in 1937.
"It makes it hard, especially on businesses, and on folks who are on fixed incomes," said Kaler, who has been in office since 2012 and appoints members of the power system board but otherwise insists she has a hands-off relationship.
A new Paducah Power System general manager is arriving with big expectations. The former director of Lubbock (Texas) Power & Light, Gary Zheng was scheduled to start work Feb. 9.
"Hopefully this new general manager will have some solutions for us," the mayor said.
For more than four decades, Paducah Power System received its electricity from the Tennessee Valley Authority, the nation's largest public power provider.
But the PPS board, concerned about rising TVA rates, voted about 10 years ago to break that partnership and invest in Prairie State, which was being developed along with its once-proposed Thoroughbred power-plant in Muhlenberg County by Peabody Energy of St. Louis. Both were to be mine-to-mouth power plants, burning Peabody coal mined nearby.
Peabody dropped Thoroughbred in 2008, after a six-year legal battle, but the large 1,600-megawatt Prairie State plant went forward and started operating in 2012, after construction costs had more than doubled to about $5 billion.
Peabody, however, has since reduced its share of the project to about 5 percent, and its risk.
Chris Curran, Peabody vice president of global communications, declined to be interviewed. "It's probably best to talk to Prairie State," he said.
Prairie State spokeswoman Ashlie Kuehn, referred questions to the Paducah Power System, as one of the plant's owners.
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Information from: The Courier-Journal, http://www.courier-journal.com