Construction estimates from a reputable local firm, Gerace Construction, put the cost of the PMF spillway alterations at roughly $8 million. That’s $8,000,000.00. This may not seem like a lot of money these days. But to a small company, such as Boyce Hydro Power, it is a sizeable hurdle to overcome. The Edenville Dam is already encumbered with debt, which was incurred in order to finance FERC-mandated dam maintenance and stability improvements. These improvements have been ongoing and Boyce Hydro Power has spent over $1.3 million on the Edenville Dam for various safety improvements since 2007.
Several factors influence Boyce Hydro Power LLC’s ability to fund the FERC-mandated PMF alterations:
- Private financing is not an option unless the dam makes more money from the sale of its single product, electricity;
- The PMF spillway alteration does not increase the dam’s ability to generate income in any way;
- Negotiations with Consumers Energy over rates have failed to obtain future rate increases;
- Consumers Energy pays Boyce Hydro Power 30% less than the average it pays for hydroelectric power to the 14 other independent producers in the state, per documents filed with the MPSC (see 2012 Consumers rates). (Note: if this document does not open in Adobe Reader, it will not display properly.)
- Costs of operations continue to rise, from gasoline (imagine how the price of gasoline and diesel affects the price of everything) to employee benefits such as health insurance, not to mention the cost of maintaining and repairing 88-year old concrete structures, machinery, and generating equipment.
An increase in the rates Consumers pays Boyce Hydro Power LLC would provide a significant boost to the Company’s ability to defray some of the cost of the PMF, but not all of it by any stretch. The Company has been lobbying for State and Federal relief, so far to no avail. Grant funding has not been found for which the PMF alteration project would qualify.
Boyce Hydro Power is pursuing the rate increase avenue aggressively, but it remains to be seen whether or not those efforts will be successful. If there is a rate increase that achieves parity with the other independent hydro power producers, Boyce Hydro Power would be able to dedicate additional after tax cash flow — potentially $252,000 per year from the Edenville hydroelectric operations — to funding part of the total PMF alteration construction, if it is financed by a long term bond fund.
Estimated annual debt service for public bonds in the amount necessary to finance the PMF spillway alterations will probably cost over $700,000 per year. More to come on this topic.