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Covington to purchase more power

COVINGTON - The City Council took steps to stabilize its cost and supply of electric power through two measures approved at its regular meeting Monday night.

Because Covington's supply of base load power - the amount of power needed 24 hours a day - is insufficient due to growth in the community, City Manager Steve Horton said the city is pursuing options to acquire more base load power and avoid price fluctuations.

The council voted unanimously Monday night to purchase additional base load power through the Municipal Electric Authority of Georgia. According to Covingon Utilities Manager Bill Meecham, this additional power supply will help alleviate broad swings in the cost of power that the city previously had to purchase "off the market."

"Covington has a commitment of generation through the MEAG plants," Meecham explained Monday afternoon. "We basically have a certain percentage allocated to us, but we've had a lot of growth, and we've had to buy a lot of power off the market. Sometimes that's a good deal; sometimes it's not; and this past summer it was not."

Under the plan, the city will enter into a one-year agreement through MEAG with The Energy Authority to purchase 5.0 megawatt hours of base load power at a more reasonable price than buying power off the market when demand increases. Other MEAG member cities are also interested in the agreement for additional base load power, according to a memorandum from MEAG.

In a proposal presented to the council Monday night, Meecham wrote that the option through TEA would allow the city to acquire power 24/7 at a cost of $62 per MWh.

"This equates to 6.2 cents per kilowatt-hour," Meecham wrote. "While this is not cheap, it is less than the 6.7 cents average some forecast for equivalent power from the market."

The contract with TEA extends for calendar year 2009. In the meantime, Meecham wrote that his department will continue to work toward finding a permanent solution to meet Covington's power supply demands.

In a related matter, the council authorized an offer of $8.4 million to purchase 7 MWh of power from another member of MEAG. Horton said the city has been actively pursuing the purchase of power from other member cities. "In doing that, the pickins have been slim," he said.

Horton explained that the city will offer to pay $8.4 million up front in addition to monthly payments to compensate the seller for the market value of the power, plus debt service and investment in fixed assets.

"This represents an opportunity to stabilize our existing prices if not reduce them," Horton said.

When questioned by Councilman John Howard, Horton said the funds for the purchase offer would come from a combination of proceeds from the sale of the city's cable TV utility and from the MEAG Municipal Competitive Trust, a fund to which all MEAG members contribute in order to ensure liquidity for projects such as this.

"The good thing about the city of Covington is that we have options," he said.

Mayor Kim Carter pointed out that the city is 25 to 30 percent short of needed base load power, which must be supplemented by buying power off the market where the price can be higher, particularly in the summer months.

Alice Queen can be reached at alice.queen@newtoncitizen.com.