BRADENTON, Fla. - Saddled with high electric rates stemming from investments in the beleaguered Prairie State Energy Campus, the Paducah Power System in western Kentucky will investigate its fiscal obligations related to the coal-fired Illinois power plant.
Paducah city commissioners sought the review, and other inquiries, after hearing from Prairie State officials and the public at their Sept. 23 meeting, according to the West Kentucky Star.
After listening to city residents who experienced escalating power cost adjustments due to cost overruns and startup problems at Prairie State, commissioners also asked for an independent expert to be hired to determine how the Paducah Power Board reached a decision to invest in controversial Illinois coal plant.
Growing public unrest about electric bills reportedly was a factor in the resignation of Power Board chairman Ray McLennan at a Sept. 22 meeting. He was replaced in the interim by vice chairman Hardy Roberts, published reports said.
The City Commission also asked the Power Board to begin the process for replacing retiring general manager David Clark.
Both McLennan and Clark are board members overseeing the Kentucky Municipal Power Agency, a joint action agency formed by Paducah and the city of Princeton to issue $491.4 million of revenue bonds in 2007 and 2010 to obtain a 124 megawatt ownership interest in the Prairie State project.
The cities have take-or-pay contracts to obtain power from Prairie State, and their revenues are the main security for KMPA's bonds.
Paducah contracted for an 83.4% share of KMPA's interest in Prairie State, or 104 megawatts, while Princeton invested in 20 megawatts, a 16.1% share. The deal included a 20% step-up provision requiring Paducah to potentially cover all project costs if Princeton defaults, according to Standard & Poor's.
KMPA's long-term underlying revenue bonds are rated A and A-minus by Moody's Investors Service and Standard & Poor's.
In March 2013, Moody's downgraded to A3 from A2 the rating the Paducah Power System's $162.1 million of outstanding electric revenue bonds, citing among the reasons pressure from its "large" off balance sheet leverage of $441 million related to its take-or-pay contract with KMPA.
Fitch rates Paducah Power's bonds A-minus with a stable outlook.
Ratepayers in Batavia, Ill., have taken several legal actions related to their high electric and sales tax rates related to the city's investment in Prairie State, including filing a lawsuit in mid-August.