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Show Parowan power ICPA explains surcharge The fourth short-term problem resulted from difficulties in UAMPS cities' attempt to finance their portion of the Hunter II plant. UAMPs was formed because RE As and municipalities could not jointly finance the project as originally though. i. Once cities become involved, Emery-county Emery-county and the Emery County School District became nervous about their tax base, because cities are tax exempt. The Public Service Commission indicated it would not approve municipal participation (and could prevent the sale of bonds by the city) until UAMPS and the Emery County groups agreed on terms which would not damage Emery County financially. Delays and confrontations resulted. Terms have now been reached, however, and McNeil said at the Parowan public hearing that "I promise you that we will bond within six to eight weeks." Once bonds are sold, Parowan and the other participating cities will no longer have to pay "Prime rate plus one percent" lor money to purchase their portion ol Hunter II. That interest rate was about 11 percent when financing was originally arranged. Then it shot to as high as 21 1 2 percent during January ol 1981. That added to Parowan's electric utility cash flow woes. "Parowan certainly is not ovei allocated from Hunter II; tht electricity has to be available frorr some source when it is called for, anc Parowan has called lor it's tota available amount at least once alreadj this year." McNeil explained. PAROWAN Reasons behind the addition of a 15 percent surcharge on local electricity charges were explained by Intermountain Cooperative Power Association (ICPA) officials at a recent public hearing. The major long-term cause is that Parowan (and almost everyone else) is using more electricity, and the additional electricity is coming from increasingly expensive source, said the officials. Ned Wilson, member information representative for ICPA, pointed out that probably Parowan's cheapest power source is its self-generation from hydro-electric plants in Parowan and in the mouth of Paragonah Canyon. The total generation capacity of the two plants combined averages about 750 kilowatts. Parowan also gets electricity through the Colorado River Storage Project (CRSP). The city's summer allotment . is 1,140 kilowatts, and the winter allotment is 1,540 kilowatts. Cost of the electricity from CRSP is $1.65 per kilowatt. The third source of electricity is the Hunter II power plant in Emery County. Through cooperative agreements with Utah Power & Light and Deseret Generation and Transmission (Deseret G & T), Parowan is purchasing a share of the Hunter II plant. Deseret G & T is an organization of rural electric associations (REAs). Cost of Hunter II electricity is currently an expensive $14.77 per kilowatt. "It doesn't take much intelligence how to see how valuable Parowan's CRSP allotment is, but I understand there was considerable upset in the community back in the early 1950s when the city fathers came back and reported how much CRSP power they had committed to," Wilson said. "It will be the same way years from now with the Hunter II power. We feel the Hunter II unit purchase is a good buy. It's an investment in the future, and it's a good purchase." Until Hunter II went on line just over a year ago, Parowan was getting supplemental power from Utah Power & Light. The Utah Public Service Commission, however, has indicated that that source will be discontinued on a firm basis in the near future. A recent increase raised the cost of UP&L supplemental wholesale electricity to $15.40 per kilowatt, and another rate increase request is pending; however, Parowan no longer purchases power From UP&L. "In order to see the value of Hunter II power, the Intermountain Power Project near Delta will start generation after 1985, and power from that source is now projected for sale at $29 per kilowatt when it goes on line," Wilson explained. "Additional new power sources are projected to be even more expensive." That's because construction costs are going up, labor costs are going up, and environmental restrictions have become stiffer." Short term financial woes for Parowan have come from four interrelated situations. The first is an accident last summer which put the Paragonah Canyon hydro-plant out of order, thus making it necessary to purchase electricity from Hunter II which normally would have been generated. On an annual average basis, the Paragonah plant generates about 350 kilowatts. Other problems have come about when "excess" power available at certain times from the Hunter II plant couldn't be sold because of the control UP&L holds over transmission lines from the plant. "It appears that we are dealing with unfriendly parties," Carolyn McNeil, ICPA controller, said. "UP&L has no particular reason to want to see us succeed; in fact if the cities involved fail to come up with financing during a three-year period, the contract says that portion of the plant will revert to UP&L. It's low cost power, for a new plant, so why shouldn't they want to get that generation?" There's hope, however, for Parowan and the other municipalities which have organized as Utah Associated Municipal Power Systems (UAMPS) to finance their portion of Hunter II. As a group, the cities and Deseret G & T entities use their full share of Hunter II power much of the time. New telemetering equipment (called JEM ID will be installed in each UAMPs city to better moniter electrical usage and more accurately bill each entity. "Excess" power from one entity will be "pooled" so another entity needing more than its allotment can use the "excess." Thus an entity will not be charged for "excess" power, if it is used by another entity. The pooling concept was a major reason for the orginal formation of ICPA in the early 1950s. CRSP power was "pooled" to the advantage of ICPA members. Another problem centers around Deseret G & T, which handled the management of the non-UP&L portion of Hunter II, attempting to buy some time for municipals involved in Hunter II. Deseret G & T absorbed a $2.7 million debt before it becomes necessary for cities to finance a billing shortage. Parowan's portion of the debt as of Dec. 31, 1981, was $67,193; payment through a loan from Zions First National Bank were set up at $4,600 per month for two years. That debt will be refinanced over a longer payback period and at a lower interest rate, once UAMPS sells bonds to finance it's portion of Hunter II, according to McNeil. |