The Mortgage Is Paid Off - Time To Celebrate!

Online, June 10, 2012 (Newswire.com) - The Utah Associated Municipal Power Systems (UAMPS) has made its last payment on a very big mortgage -- $66 million worth. It now owns, free and clear, its share of the Hunter II Power Plant near Castle Dale in Emery County.

"It's all ours, no more payments to bond holders. It's kind of a good feeling," said Douglas Hunter, UAMPS General Manager. "We actually paid the bonds off four years earlier than anticipated by the original agreement."

UAMPS issued $66 million in bonds on May 1, 1982, some 30 years ago. The money was used to purchase 14.6 percent of the Hunter II project, about 57 megawatts of the 390 MW coal-fired steam-electric generating unit.

"Thirty years ago, going into debt for $66 million was a rather scary proposition for 21 relatively small Utah municipalities," said Hunter. Those entities had formed UAMPS essentially to buy a share of the Hunter II plant.

Today, with a great deal of growth over the last 30 years, the Hunter plant provides only 11.4% of UAMPS' resource mix. The consortium has more than doubled the number of municipal members and has grown from ownership in just one project to 15 diverse energy-producing and/or service projects.

But, Hunter II means much more to UAMPS than just its status as the initial source of electrical energy. Hunter II really made UAMPS, forming its foundation and creating its identity. "We were really born with Hunter II," said Hunter. "It taught us numerous lessons, and turned us into what we are today."

In purchasing a share of Hunter II, UAMPS learned how to deal with complex problems and near-insurmountable barriers. "Hunter II forced us to create infrastructure to deal with the complications of ownership, everything from engineering, to project management, to legal, accounting and public relations" said Hunter. "We developed expertise and sophistication to build UAMPS into a large, successful electrical electric service entity."

The purchase of Hunter II occurred when municipal power departments were mostly buying power from other entities, including from federal hydro projects, and also from Utah Power & Light Co. (UP &L). Many contentious regulatory and legal battles occurred in the courts and before the Utah Public Service Commission between UP&L and the municipal power agencies.

Municipal leaders determined it made sense to control their own power, even if the original purchase agreement meant initially higher electrical rates for municipal power department customers. City Council members were not pleased when the rates increased. "We had some tough discussions in City Council meetings," Hunter recalled. "City leaders were not happy."

UAMPS then challenged the agreement and changes were authorized, providing flexibility for UAMPS to allocate its power supply more efficiently and avoid high charges to customers.

Looking back over 30 years, Hunter said the Hunter II has served UAMPS well. "It has been a workhorse for UAMPS. It has been our lowest-cost coal project for many years."

Hunter II could probably operate for another 20 years, but it will need environmental upgrades, Hunter said, requiring more capital investment. The future is somewhat uncertain for coal-fired electrical plants, given possible federal regulations.

"It's nice to own our share of Hunter II outright," said Hunter. "And as important as the power were the lessons we learned and the expertise and sophistication we developed as a result of owning the plant."

--#-