City Water, Light and Power made money generating electricity during the past year, but just barely, Springfield’s top municipal utility official told the Citizens Club last week.
“It’s been a very thin year,” chief utility engineer Eric Hobbie told the audience. “Are we making money off of it? Yes.”
Nonetheless, a preliminary budget for next year includes cutbacks in maintenance and capital expenditures, Hobbie said after a panel discussion on municipally owned utilities. He could not guarantee how long electric rates will remain at current levels.
Dallman 4, the city’s newest coal-fired electrical plant that came on line in 2009, was built based on electricity selling for between $50 and $100 per megawatt hour, which was the going rate in 2005 when the plant was in the planning stages. Planners believed that consumers outside Springfield who used city-generated power would pay off construction debt.
The market bottomed in 2008 and remains low, with power selling for between $35 and $40 per megawatt hour. The city spends $30 to generate a megawatt hour, Hobbie said.
“Naturally, our budget has become more volatile,” Hobbie said. “We’re in a big down right now in the market.”
What might happen in the future is tough to predict, panel members said.
Natural gas is a wild card, according to Karl McDermott, Ameren Distinguished Professor of Business and Government at University of Illinois Springfield. A controversial method of extracting gas from rock by injecting water and chemicals into the earth could prove a boon to gas-fired power plants that are now more expensive to operate than coal-fired plants.
“We will have a ton of it (gas), and the price will come down, if the technology is allowed to come to fruition,” McDermott said.
Coal now is the only realistic option for generating electricity, panel experts said, but that may not always be true.
“The glass is cloudy,” said Phillip “Doc” Mueller, senior vice president of the Illinois Municipal Electric Agency. “We’re all guessing about what it’s going to look like a few years down the line.”
The experts agreed that running a utility is an incredibly complicated proposition. For one thing, electricity, unlike gasoline or corn, is the only commodity on the planet that cannot be stored, so CWLP must constantly gauge how much power to produce – too much and the city could be forced to sell at a loss; too little and the city might have to buy off the grid. There is also the matter of complicated technology and a budget that is three times the size of the city’s budget for everything else, including police, firefighters and public works.
While the city of Springfield in Missouri, which also owns its own power plant, has a board devoted to overseeing the municipal power plant, aldermen do it here at the same meetings where everything from animal control to liquor licenses are discussed.
“It’s difficult to do – they’re pulled in a lot of different directions,” Hobbie said. “It (CWLP) is a large business. This isn’t a knock on anybody. It’s difficult for an alderman to understand what goes on every day. … There are concerns about it.”
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