When Owensboro Municipal Utilities sends out its bills each month, there’s a charge for “Environmental Control Cost Adjustment” and a charge for “Energy Cost Adjustment.”
Most people pay the bills without looking at those items.
But some wonder why, since OMU shuttered its Elmer Smith Power Plant in May 2020, they’re still paying those fees.
Sonya Dixon, communications and public relations specialist at OMU, says that even though the power plant has been closed for two years, the utility still has debt for things like environmental control equipment that was purchased for the plant years ago.
And the environmental cleanup of the property will still take a few more years.
Work begin in April to dismantle the massive Elmer Smith plant and the William Cavin Water Treatment Plant, which is also no longer used.
That work is expected to take 18 months.
The power plant, which opened in 1964, contained 7,500 tons of steel and 400 miles of conductor wire.
And Dixon said the plant has had additions since then.
Two chimneys at the plant — 650 feet and 420 feet high — will be taken down this fall, Dixon said.
Clean up will follow that.
Dixon said OMU began a rate stabilization and reduction plan in 2019.
In 2020, when the Elmer Smith plant closed, OMU began buying electricity from Big Rivers Electric Corp.
The idea was to hold down rates for customers.
In the coming fiscal year, OMU said the average electric bill is expected to drop from $108.16 a month to $106.68.
Kevin Frizzell, OMU’s general manager, said the base rate for electricity should remain unchanged until Fiscal Year 2024 and 2025, when 5% increases will be needed each year.
But he said decreases in the energy cost adjustment should more than offset those increases, meaning no overall increase in either year.
Dixon said the Energy Cost Adjustment reflects recovery of energy costs the utility incurs as well as decommissioning costs for the Elmer Smith station.
It’s based on the amount of kilowatt hours of electricity a person uses.
The Environmental Control Cost Adjustment, Dixon said, “is a surcharge to recover costs for complying with governmental-mandated environmental costs and is assessed on kilowatt-hour use. Currently, even though Elmer Smith has been shut down, there are residual emission control costs, including debt service related to compliance with the Clean Air Act Amendments related to sulfur dioxide and nitrogen oxide and the mercury and air toxics standards at the Elmer Smith Station.”
She said the amount charged by the ECCA is expected to decrease from $0.0043 per kilowatt hour now to $0.0002 per kilowatt hour in Fiscal 2027.
OMU will evaluate the charge at that time and decide whether to remove it or continue it, she said.
Dixon said, “The average ECCA cost for an OMU residential customer using 900 kWh is $3.87 per month. At the ECCA rate of $0.0002/kWh projected for 2027, it would be an average of 18 cents per month.”
That charge has been on OMU bills since 1998, she said.
Dixon said the ECCA and ECA are used by electric utilities across the nation, although they may use a different name or acronym.
Frizzell said last year that the decision to decommission the Elmer Smith power plant and buy electricity from Big Rivers Electric Corp. helped the utility to survive the pandemic.
“If we were still operating the Elmer Smith plant, it would have been a disastrous year,” he told the City Utility Commission.
At the beginning of Fiscal 2021, there were 65 employees still at the old power station.
Today, there are only three working on decommissioning the plant, Dixon said.
On Jan. 1, 1901, what’s now Owensboro Municipal Utilities began producing electricity from coal.
That era ended at 1:36 a.m. on May 20, 2020, when the Elmer Smith plant used up its final supply of coal.
And nobody noticed as electricity from Big Rivers Electric Corp. began powering the city.
In July 2018, the City Utility Commission signed a purchase-power agreement with the Henderson-based electricity cooperative and unveiled a broader energy portfolio that will give OMU more control over its rates.
Frizzell said at the time that it had become too expensive for small utilities to continue operating.
“We’ve seen a surge of low-priced natural gas, environmental challenges and renewable energy,” he said. “We started looking at this five or six years ago. There are a lot of pressures on coal-fired generation.”
And OMU’s electric rates had been rising for several years.
Frizzell said in 2020, “The new contract will lower our rates over the next four to five years. Big Rivers was our lowest cost option. We had a rate reduction of more than 10% this year.”
He said the contract with Big Rivers runs through Dec. 31, 2026.
The deal also helps Big Rivers, which had struggled in recent years.
In 2013 and 2014, aluminum smelters in Hawesville and Sebree stopped purchasing power from Big Rivers.
The two smelters at one time accounted for about two-thirds of Big Rivers’ load and revenue.
Frizzell said in 2020, “We’ll still have debt on the Elmer Smith plant for five years.”
The 440-megawatt Unit 1, which was built in 1964, shut down in 2019.
The 280-megawatt Unit 2, which closed in 2020, was built in 1974.
At its peak, the Elmer Smith plant had 100 to 110 employees.
Keith Lawrence, 270-691-7301 firstname.lastname@example.org