CHICAGO — The Sierra Club of Ohio is ramping up its efforts to prevent ­American Municipal Power Inc. from building a new $3.9 billion coal-fired plant in Ohio.

The environmental group is launching a new media campaign with a report arguing that demand for power across the Midwest is declining sharply and that municipalities participating in the project could find themselves unable to afford the power in the future.

Claiming that the circumstances surrounding AMP’s proposed plant have “radically changed over the last three years,” the report argues that demand for power is dwindling and that other risks — such as pending coal-fired technology regulation — could drive up capital costs.

The group notes that so far in 2009, Ohio’s electric sales have declined 14.5%, while sales nationally are down nearly 7%. The group predicts that next year Ohio will be “likely to experience lower or even negative electricity demand growth” and the “complete elimination of all new growth in electric sales by 2014.”

A nonprofit wholesale power and service provider, AMP serves 128 electric systems across six states, most located in Ohio. The proposed American Municipal Power Generating Station, which the utility says will be one of the cleanest coal-fired projects in the U.S., is a 1,000-megawatt generation facility located in Meigs County.

The agency has received most of its federal and state permits for the project and has secured a $30 million bridge loan from the state. No bonds have yet been issued for the project. The plant is expected to be up and running by 2014.

The plant is part of AMP’s ongoing effort to lock in the long-term cost of power, rather than rely on the open market to purchase power. In addition to AMP Generating Station, the utility is building a series of hydro-energy plants along the Ohio River. AMP is expected to issue bonds later this year to finance that project.

The utility has also nearly completed financing its 24% ownership share of the $4.36 billion coal-fired Prairie State Generation Station in southern Illinois.

The total cost for the three projects could reach $6 billion. Once all projects are complete, the agency expects to reduce its open market power purchases to 10% from 60%.

While many credit analysts count the utility’s ability to hedge future prices as a strength, the Sierra Club cites it as a risk.

“The market is glutted with capacity right now and will be for the foreseeable future,” said Nachy Kanfer, an associate regional representative with the Sierra Club’s Beyond Coal campaign in Ohio. “The most prudent thing & can do in this dynamic economic environment is to wait. If I were an independent observer, I would say there’s no reason to rush into construction.”

By locking in long-term rates, municipalities face the risk of unfavorable rates in the future if market prices decline, Kanfer said.

“In most municipalities, those costs will be passed along to the consumer,” he said.

The project also faces a possible challenge from pending federal laws regulating the technology for coal-related emissions, which analysts and critics agree could mean a significant increase in costs. And a relatively new Ohio law that requires investor-owned utilities to save at least 22% of their electricity consumption by 2025 could also dampen future demand, Kanfer said. 

The Sierra Club plans to hold a series of town meetings across Ohio to protest the plan. On Tuesday, U.S. Rep. Dennis Kucinich joined a group of students at AMP’s annual meeting urging the utility not to build the coal-fired plant.

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