ARPA power plant costs rise again

By Todd Wildermuth
for The Raton Range

The Raton Range/STPNS

May 07, 2008

RATON, New Mexico (STPNS) -- Costs continue to rise on the Arkansas River Power Authority's (ARPA) Lamar Repowering Project, with the estimated price tag recently pushed to $124.7 million, nearly double what the project was expected to cost when it was introduced four years ago to Raton and the other six ARPA municipal members.

The project is converting from natural gas to coal-fired a power plant in Lamar, Colo., that ARPA officials say will provide the best source of electricity for ARPA members in the years to come.

Raton officials disagree with that outlook and have questioned the economic feasibility of the project from the beginning, although the city commission reluctantly approved the project at its earlier cost projections.

Some of the causes for the project's latest price hike were listed by Trinidad Power and Light Superintendent Dave Brunelli in a presentation to Trinidad's city council at its meeting last week. Brunelli said the causes included increased costs of commodities like steel, copper and concrete, increased labor costs, a limited supply of spare parts for the plant, and the bankruptcy of the "coal reclaimer" company previously used by ARPA.

"All these things are driving the cost high," said Brunelli, who is one of Trinidad's representatives on the ARPA board.

ARPA is a power-purchasing consortium made up of seven municipalities in Colorado and New Mexico. ARPA members include the Colorado municipalities of Holly, Trinidad, La Junta, Springfield, Lamar and Las Animas. Raton is the only ARPA member in New Mexico.

The Raton City Commission in December voted to pursue litigation against ARPA. The litigation was filed in U.S. District Court in Albuquerque in January. The city filed its lawsuit to seek to limit its financial liability for the Lamar project to the $76 million it has approved. The city has been the lone ARPA member to disapprove of further budget increases for the project that ARPA proposed in 2004 at a cost of $66 million.

After previously discussing the latest cost increase in closed sessions, the ARPA board had its initial public discussion of the increase during its April 24 meeting. The ARPA board had a conference call scheduled for Monday for further discussion and possible action to authorize additional bonding for the cost increase. Raton's two ARPA board members - Raton Public Service Company General Manager Glenn Fisher and RPS board member Kathy McQueary - were expected to oppose the additional bonding.

Fisher on Monday said the rising cost of the Lamar project that is already being passed onto ARPA members will mean Raton electric customers will see higher bills, likely starting in July. He said exactly how much bills will increase is still being worked out by RPS officials, who have discussed the potential of using some of the local utility's reserves to offset some of the rising ARPA rates. How much, if any at all, of the RPS reserves can be dipped into will depend on how much of the reserves are needed for other upcoming power-system improvement projects in Raton, Fisher said.

ARPA filed its own lawsuit in federal court in Denver seeking a court order requiring Raton to pay its full share - through power purchase rates ARPA charges Raton and its other six members - to help cover the full cost of the Lamar project. However, the Denver judge in March dismissed the suit, ruling that the dispute between ARPA and Raton should be decided in New Mexico.

On Friday, the Albuquerque judge agreed with the Denver judge and dismissed ARPA's motion to transfer the case to Colorado. No decisions have yet been rendered regarding Raton's other allegations in the lawsuit, which include negligent misrepresentation by ARPA, as well as claims that paying for the higher costs of the Lamar project will cause Raton to violate New Mexico's anti-donation law, and that agreements between Lamar-based ARPA and the City of Raton authorizing the Lamar project lack required approval by the New Mexico Department of Finance and Administration.

In January 2006, the project's cost was increased $10 million to $76 million, the last price hike that was approved by Raton. ARPA then came back to its members asking for $18 million more, raising the price tag to about $94 million. Soon after, the project's cost increased to $110 million.

Early this year, the rebuilt Lamar plant was scheduled to start generating electricity in March, but the timeframe for bringing the plant online has now been pushed back to at least July, according to Fisher. He said ARPA right now is having to purchase power for its members on the open market.

Despite the rising costs and delayed start-up, ARPA officials have repeatedly told members that the Lamar project will be the most reliable and economic means to generate and supply electricity to ARPA members in the years to come.

In Trinidad last week, Brunelli stated that he and the City of Trinidad support

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