Ukiah OKs repair of old power plant

Rising electricity costs, Calpine bankruptcy encourage decision

Ukiah officials are pursuing new electrical power sources, spurred by rising energy costs and Calpine

Corp.'s bankruptcy.

They plan to fire up the city's defunct hydroelectric plant at Lake Mendocino and buy into a new facility.

The city, which is the electrical utility for its residents, expects the hydroelectric plant to be operational by May 1.

"It will provide some cost control and stability that we don't have now," said City Councilman John McCowen.

The City Council on Wednesday approved spending $680,000 to jump-start the two projects.

Ukiah already was suffering from a spike in electrical costs brought on by Hurricanes Katrina and Rita and the end of a low-cost energy-buying contract when Calpine announced its bankruptcy this week.

The bankruptcy is expected to prematurely end a long-term contract with the company, which provides about 17 percent of the city's energy at half the cost of electricity sold on the open market.

The city currently pays about $60 a kilowatt-hour to Calpine for electricity, McCowen said. It would pay closer to $135 a kilowatt-hour on the open energy market, he said.

Despite cost increases, the city has been holding electrical rates steady for the 5,985 households it serves by dipping into a fund earmarked for rate stabilization, McCowen said.

But that can't go on indefinitely.

The fund earlier this year was projected to decline from $11.5 million to $9.6 million by June.

But "we're going to eat into it significantly higher than that," said Ukiah Finance Director Mike McCann.

He said he has not yet calculated the additional fund expenditure.

To buffer the city from future energy price hikes, the Ukiah City Council on Wednesday approved spending $650,000 to begin repairing the city's idle power plant at Lake Mendocino and $30,000 to investigate the purchase of another power plant as a member of the Northern California Power Agency.

The agency is a consortium of cities and other public agencies that own shares in public utilities.

Restarting the ailing, 20-year-old Lake Mendocino facility got its first push in years from Bernie Ziemianek, the city's outgoing public utilities director.

He persuaded the council last year to spend $200,000 to determine whether it was worth repairing the plant, which has been dormant for nearly seven years, all the while costing the city $2 million a year in debt repayment.

The study indicated it was worth repairing the plant at an estimated cost of $1.4 million, Ziemianek said.

The repairs will be done in two phases. The first will modify a 16-foot by 11-foot sliding gate so the facility can be repaired without shutting down water flows from Lake Mendocino into the Russian River.

When the plant was first built, such shutdowns were allowed. Regulations intended to protect fish now prohibit the city from blocking water flows.

The plant never ran at full capacity and was widely considered a boondoggle, but rising energy costs are now making it a viable venture.

It was estimated in June the plant would offset the city's electricity costs by $750,000 year, McCowen said.

"It should be more like $1.5 million" with the recent increase in energy costs, he said.

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