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Ohio Citizen Action February 5, 2009 Honorable Ted StricklandOffice of the Governor Riffe Center, 30th floor 77 South High Street Columbus, Ohio 43215 Dear Governor Strickland: Ohio Citizen Action staff recently reviewed state documents under the Public Records Act relating to the use of public money for the proposed American Municipal Power Ohio (AMP-Ohio) Meigs County coal-fired power plant. The conclusion from this review can only be that there is no basis for arguing that this project depends on a public subsidy to move forward. If the project does not depend on public subsidy, but the State of Ohio grants the subsidy anyway, the public money will have been wasted. If there are state documents we were not given that demonstrate otherwise, I would appreciate your sending them to me. Ohio Citizen Action has been closely following the record of the development of this plant. In January 2008, project consultant R.W. Beck gave AMP-Ohio an updated technical and financial report. The report states that acquisition and construction costs will be financed with revenue bonds. This report does not mention the need for additional public subsidies, nor does it mention a risk of the project being cancelled if incentives are not secured. In early 2008, several independent consultants reviewed the AMP-Ohio plant for the City of Cleveland, Cleveland City Council, and others. None of those experts identifed any additional subsidies as part of the financing package. In the fall of 2007 and winter of 2008, several city councils had vigorous debates about whether their cities should participate in building this proposed coal plant. To our knowledge, AMP-Ohio did not make any disclosures to the public, or to the communities it was soliciting to sign fifty-year contracts, that the plant would only go forward if the State of Ohio provided additional subsidies. If this were the case then our State’s municipal electric systems were not provided a full picture of the proposed plant’s finances prior to making their decision. In fact, at these council hearings in February 2008, AMP-Ohio officials strongly assured the communities that the project was moving forward, and that communities should sign on to the project by a March 1, 2008 deadline. Surprisingly, two months later, in April 2008, one state official wrote to the Governor’s Chief of Staff and others: Christi [Mash, Regional Economic Development Director for the Marietta Region] and I are at our wits end in trying to get an incentive package to induce AMP Ohio to build a plant in Meigs county instead of buying power on the grid. This statement raises several obvious questions. If, without the subsidy, AMP-Ohio would buy power on the grid, then is the reason for building the plant the opportunity to get public subsidies? What other explanation is possible? Similarly, the notes of one phone call include the following: . . .federal dollars are available but AMP doesn’t want to deal with the EIS [Environmental Impact Statement] required by accepting federal funds . . . If the AMP-Ohio project cannot go forward without
subsidy, why is it rejecting the option of federal money because it
would rather not do an Environmental Impact Statement? And what
information is AMP-Ohio afraid such a statement would turn up? Giving LNTP ("limited notice to proceed") does not mean that construction on the facility will start, that is still contingent upon receipt of all necessary permits and successful negotiations on state and local incentives. In 2005, when AMP-Ohio apparently first approached Ohio Department of Development officials, those officials were under the impression that the State of West Virginia was in competition for the plant. The State of Ohio’s commitment of assistance is based upon the following understanding of the project: . . . The State of Ohio is in competition with the State of West Virginia for this project. It is unclear from the record what created this impression. It seems odd that if AMP-Ohio considered the subsidies a necessary part of the project that they would have waited three years for Ohio to make up its mind about an incentive package if West Virginia were actively pursuing the plant. The lack of information makes one wonder whether there ever was a serious competitive threat regarding this plant. Finally, the proposed October 2005 package suggests that AMP-Ohio will make a $1.2 billion “investment.” By April 2008, the investment had risen to $3.2 billion. The term “investment” is a misnomer since AMP-Ohio is not taking an equity position of $3.2 billion. It is borrowing the money with bondholders and local municipal electric systems holding the real economic risk. One might expect a technical economic development document to be more accurate. The project cost is $3.2 billion and rising, and it will be financed by tax-exempt revenue bonds, which is already a significant public subsidy. The statements do accurately reflect that project finances have dramatically increased. The costs have even risen beyond the $3.2 billion level. It is highly questionable that with or without subsidization this project will keep electricity prices affordable. This project is not only a weak candidate for a subsidy, it risks becoming a drag on Ohio’s economy. As you know, communities across the country have canceled coal fired power plants. Whether these plants are sponsored by public power organizations or utilities, the costs have been soaring. AEP, an important supplier of electricity to Ohio’s grid, said in December 2007 that it would not be responsible for them to proceed with new coal fired power plants. Dozens of other companies have pulled the plug. Kansas, Florida and California have effectively banned new coal-fired technology. A recent judicial decision gave the U.S. EPA jurisdiction to impose new carbon protocols on new coal fired plants. Congress, and the new administration in Washington, are moving forward on global climate change legislation. This means the AMP-Ohio plant will experience another round of substantial cost increases to comply with new regulations. The question is not if but when they will be imposed on the project. It appears from the records provided to us that something is wrong here. Either the project needs the subsidy or it doesn’t. If the former, then the public and those municipal electric systems were not told the whole truth about the project’s finances when their city councils voted to sign 50-year contracts. If the latter, then why toss public money out the window at a time when you are cutting basic services? Sincerely, Sandy Buchanan |