PMLD appeals to governor about utility costs, turbine issues
June 4, 2013
BY PHYLLIS BOOTH PBOOTH@THELANDMARK.COM
Princeton Municipal Light Department manager Brian Allen has written to Governor Deval Patrick, noting that the failed wind turbine project has contributed significantly to the town’s high utility costs. He is seeking financial support from the state.
“The intention of the project was to provide ‘home grown’ renewable energy to our customers and stabilize our rates in an ever increasingly volatile electric marker,” Allen wrote in the letter, which was sent in April.
“A delay in the start of the project resulted in the issuance of a $7.3 million loan before the project was able to generate revenues to pay for itself. That results in a $1.4 million debt to PMLD’s energy partner, The Massachusetts Municipal Wholesale Electric Company, who covered the payment of the loan with their line of credit,” Allen wrote.
That debt is outstanding and PMLD has no way to pay it off in the near future, according to Allen. In his letter, Allen stated that the original projections for the windmill project were based on energy prices being at $90-$100 per megawatt hour and the business plan was based on those numbers. But for most of the lifetime of the turbine project, energy prices have been under the $90 megawatt hour, so PMLD is receiving one third of the projected revenues.
There is some good news for consumers, however: Allen said that that the purchase power cost adjustment, which added to previous bills, will likely vanish over the summer.
“We’re getting back to where we were,’’ he said. “We did what we said we had to do to cover our costs, but it’s going to zero for June. If there’s an energy spike we’ll have to change it.’’
PMLD is a municipal utility with a $3 million budget and the turbine cost was approximately $1.2 million of that budget in 2012. “The utility does not have the ability to sustain itself with those types of losses,” wrote Allen.
Added to that was the failure of the gearbox in June 2012. To date, $900,000 was spent to replace the gearbox and fund-related costs, which have not been covered under any warranty agreement, nor has PMLD’s insurance provider given the department any relief under its insurance policy for mechanical failure and business interruption. Attorney fees have also piled up trying to recoup some of the expenses.
In September 2012, PMLD was told that the German manufacturer, Fuhrlaender, declared insolvency and in February, the company was dissolved. Allen has met with a variety of companies and investors to explore options of selling the turbines. Under that option, the turbines would stay in Princeton and the energy purchased by PMLD, but the machines and maintenance would be the responsibility of the buyer.
But because the original manufacturer is out of business and most of the components are European, the turbines have little value, according to Allen. One broker he spoke to thought the turbines might be worth $150,000 each, if they were taken down and the components sold individually. “This was not welcome news,” wrote Allen.
While Allen was not the general manager at the time the turbines were purchased, he wrote, “In hindsight it was a poorly crafted business plan even if the circumstances were different. The project was much too large of a risk for a small utility company. Truly, the thought that this project might not work was not considered and all our working capital and reserve funds were used to cover unanticipated expenses. The reality is, the project did not work and continues to slowly deplete this small utility of funds on the backs of ratepayers.
“What is needed is some financial help. In a state touting our commitment to renewable energy, it would seem that our state officials should not only be there during the press releases and ribbon cuttings, but also when things don’t work out as planned,” wrote Allen.
He asked the governor for assistance in helping PMLD to solve the problem. “PMLD made a legitimate attempt in ‘going green.’ In our case that has been extremely detrimental to our customers and to this small utility. I am certain this is not the message that you want conveyed to the citizens of the Commonwealth,” wrote Allen.
Copies of the letter also were sent to U.S. Rep. James McGovern; Kenneth Kimmell, Commissioner of the Massachusetts Department of Environmental Protection; and Mark Sylvia, Commissioner of the Massachusetts Department of Energy Resources.
At the May 8 meeting of light commissioners, Allen reported that McGovern’s office had responded. He’s providing them with additional information and he’s had a positive discussion with them. “We’ll see where it goes,” he added.
Allen said he’s found there is a lot of misinformation out about the windmills and he’s planning to write a letter to ratepayers to explain the issues facing the department. He said there was a lot of information on the PMLD Web site at pmld.com.