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Council Approves ARPA Bond Sale Ordinance

 

The Lamar City Council approved, on first reading, the Power Purchase Agreement between the City of Lamar and Tri-State G & T and the termination of the Power Supply Agreement between the City and Arkansas River Power Authority (ARPA). As part of the agreement, the city approved ARPA’s execution of the Defeasance Funding and Assignment Agreement with Tri-State.  The action came during the council’s regular meeting on Monday, May 14th.  A second final ordinance approval is expected during the next council meeting this month.

Several months ago, the ARPA Board of Directors was approached by Tri-State G & T with an offer to pay-off all the $140M ARPA’s debt from the failed Lamar Repowering Project and in return, the six ARPA municipal members would agree to purchase all their power from Tri-State for the next 32 years, until 2049. If approved by all six members: Lamar, Holly, La Junta, Trinidad, Las Animas and Springfield, the action would immediately reduce the wholesale cost of power by slightly more than 7% and it is expected that future wholesale electric prices will be lower from Tri-State than they would be from ARPA.  Customers should expect to see those changes by the end of July if all the calendar targets are met.

Because the overrun costs of the Repower Project forced ARPA to raise rates to pay for the financing bonds, customers have been paying more than the current market price of electricity. It was expected by the council that there will be no reduction in the price ARPA charges for electricity until at least 2043.  Five separate bonds were issued to pay for construction costs for the Project and ARPA’s bond reserve accounts of $12.2M will be used to pay down the bonds as well, reducing the costs to about $131M for Tri-State to assume.

Rick Rigel, ARPA General Manager, led a public discussion to explain the steps needed to enact the transfer prior to the 7pm City Council meeting where the vote was held on the ordinance. He explained that all six members need to sign on for the deal to move forward and currently Las Animas and Springfield are on board with La Junta and Trinidad expected to take action later this week. Holly is conducting public hearings on the matter before their vote later this month.  Rigel was accompanied by Jack Johnson, President of SECPA, Brad Nebergall, Senior VP of TSGT and Houssin Hourieh, Lamar Light Plant Superintendent who answered questions from the audience.

There will be no changes to the operation at the Lamar Light Plant while Southeast Colorado Power will act as the pass through entity for Tri-State G & T. There will be no charge to customers for their service.  SECPA would take title to the power for resale and would perform invoicing.  The 8% savings would be in effect until 2021 under the new agreement and the projected rate from 2022-2024 would be approximately 7% from current rates.  ARPA members would save approximately $11.2M through 2024 and the direct savings for Lamar would be $3.5M.

Rigel noted that a contract is being negotiated for the resale of the Lamar Repowering Project which includes some land as well as equipment at the site along North 2nd Street in Lamar. Terms of the sale beyond a rough time span of 18 months, into 2019-2020, were mentioned.

By Russ Baldwin

Filed Under: City of HollyCity of LamarConsumer IssuesEconomyFeaturedHistoryUtilities

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