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Holly Trustees are Third ARPA Member to Approve Settlement

ARPA-LogoThe Holly Trustees voted to join their counterparts in Las Animas and Springfield, voting unanimously May 3rd, in favor of the proposed settlement agreement in litigation between Arkansas River Power Authority, ARPA and the City of Lamar.  ARPA general manager, Rick Rigel, was on hand for the monthly Trustees meeting to offer explanations on the resolution or answer questions regarding its impact on member municipalities.  “We believe Trinidad and La Junta will consider the issue by the middle of the month,” he explained, adding that the process will then forward the matter before each of the two board representatives for the ARPA communities.  “Once we’re at that point, a unanimous yes vote from all parties will move the issue to the Lamar City Council for their decision on the settlement,” he stated.

Terms of the settlement call for the City of Lamar to receive an upfront payment of $1M from ARPA as well as $400,000 a year for the next 26 years. Other items in the settlement, according to Rigel, are the coal domes and related unloading coal conveyors some property, all situated on the north side of East Maple Street, the site of the Lamar Repowering Project.  “In exchange, the city will abide by the terms of the organic contract, re-affirming contractual obligations to ARPA and this includes continuing to purchase power from ARPA though the payment of the bonds, including any refunding.  This means the litigation between both parties will be dismissed.”  Rigel said if anyone is not on board with the settlement, the case goes back to court and he predicted a timeframe for that to occur beginning around late fall or early winter.  “Regardless how this turns out, I feel the losing party will appeal the decision and that process may take another two years until its conclusion.  And while this is taking place, ARPA cannot take any steps to refund the bonds,” he explained.  Rigel said he had no idea what the City of Lamar intended to do with their settlement award.

He added, “If we didn’t have the suit, there’s a potential for savings based on current market prices of about $800,000 a year. The market has been in our favor since the start of the year.  But on the other side, if the market loses, we could see reduced savings.  We feel acting quicker would be a way we could achieve more stable rates.”  The ARPA general manager said ARPA is much healthier now compared to a low point in 2011.  “We had $200K in the bank and that year, a negative net income of $370K.  We also owed $1.87M for prepaid electricity we had to borrow from our members to meet a bond reserve account obligation.  Those have been paid off as of 2014 and we now have $5M in the bank and last year our net income was $3.6M.”

On a question from one of the Trustees on predicting how much could be saved on a reduction of the bond interest rates, Rigel replied, “It’s difficult to do that because we had five bond series issued between 2003-2010 and each have varied interest rates. We can see some savings in them, but all can be called at different times and at a different rate.”  Rigel said the savings will help with continued stable rates, but there are so many variables.  Legal fees on a number of different lawsuits between 2011 and 2016 are at $5.5M; power supply costs are expected to go up about 2.5% this year, while transmission rates may see a reduction by 2019 through actions taken by the state’s transmission operators and WAPA, a power supplier, may have a 14% rate decrease in 2018.  On another question, Rigel said about from $110M to $120M would be available for potential refunding.  “We still have an obligation with a purchase power contract until 2025 and the WAPA contracts are until 2024 and 2054.”

By Russ Baldwin

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