In January I mentioned that a municipal utility agency created as a kind-of public-private partnership between the West Texas Municipal Power Agency and Republic Power Partners was taking off in an unexpected direction and leaving more than a few locals wondering what was going on. In brief, High Plains Diversified Energy Corporation, the partnership, was created a year or two ago to find or build power plants to serve the WTMPA’s post-2019 need for power – 2019 is when existing wholesale supply contracts will expire – but in January it suddenly proposed purchase of two large and somewhat distant power plants with more than 3-times the generating capacity and more than 7 years sooner than necessary.
It may well be, as the HPDEC maintains, that it is getting a great deal on the power plants. But a few problems have sprung up: HPDEC wants to borrow $1.5 billion or so in municipal bonds to finance the purchase of the plants and necessary transmission enhancements, the City of Lubbock asserts the group doesn’t have the legal authority to do so. There will be a lot of excess power, and selling the excess power is complicated since there are limits to the sale of power to non-municipal customers when the power plants are funded by tax-exempt municipal bonds. Meanwhile, the city of Odessa, Texas, home of the two power plants, doesn’t want that property taken off the city’s tax rolls and has convinced the state legislature to protect its interests. Lubbock, WTMPA, HPDEC, and Odessa, among others, are headed to court today to get some clarification.
Charles Dunn, a local attorney blogging the developments at Lubbock Power Grab, notices that because Lubbock residents make up 85 percent of the WTMPA load, we’ll be on the hook for legal fees on both the WTMPA/HPDEC and City of Lubbock sides of the issue.
Here’s hoping they come to a quick settlement.
ADDED: That was quick. Headlines after the hearing, from the Lubbock Avalanche-Journal, “Major electricity project can’t move forward, judge says“; from KCBD, “Judge kills $1.5 billion Lubbock power deal.” In essence the judge concluded that the public-private joint venture was not legally formed, so not only can it not be exempt from paying local taxes, not use eminent domain if needed for transmission, and not sell municipal bonds to raise oodles of cash, it can not and does not exist legally.
So, barring a rescue on appeal, the joint venture entity is dead and with it all the complications associated with the proposed power plant purchases.
Which just leaves the city of Lubbock’s municipal utility and the other members of the WTMPA with the complication of figuring how they will replace the wholesale power contracts with Xcel that expire in 2019.