Feb 15 - McClatchy-Tribune Regional News - Karen Dillon and David Klepper The Kansas City Star, Mo.

A powerful congressman and his committee have jumped into the Kansas coal dispute, raising questions about the financial viability of a proposed power plant expansion in western Kansas.

U.S. Rep. Henry Waxman, a California Democrat, on Thursday launched an inquiry into whether a federal agency has provided loans to rural utilities to build coal-fired power plants without considering the financial impact that future greenhouse-gas regulations are likely to have on those plants. Waxman is chairman of the House Oversight and Government Reform Committee.

In a letter to the agency, Waxman specifically mentioned the two coal-fired generators that Sunflower Electric Power Corp. plans to build in western Kansas.

According to the letter, obtained by The Kansas City Star, Waxman raised concerns that taxpayers and ratepayers could be on the hook for billions of dollars if the Rural Utilities Service has failed to consider the cost of future emission controls.

"There is an increasingly widely held expectation that the federal government will adopt legislation or regulation to cap greenhouse gas emissions within the next few years," Waxman wrote in the letter dated Thursday. "A coal-fired power plant with uncontrolled carbon dioxide emissions would likely face substantially higher operating costs."

In a recent court filing, the Department of Justice described Sunflower as a "financially troubled borrower."

Sunflower's plans to build the $3.6 billion generators do not appear to include the cost of installing carbon dioxide emission controls on the new generators, which are expected to emit 11 million tons of carbon dioxide annually.

Sunflower owes the federal financing agency $200 million, Waxman wrote, yet the agency has given the utility permission to assume more debt.

"If RUS failed to take (CO{-2} regulations) into account, it has put both taxpayer funds and Kansas ratepayers in jeopardy," Waxman wrote. "If this plant is built, Kansas ratepayers may be stuck with billions of dollars in stranded assets and skyrocketing costs for power."

Rural Utilities Service officials did not respond to requests for an interview.

Steve Miller, a Sunflower spokesman, said the company planned to pay off the $200 million debt within 15 years, and added that the label "financially troubled borrower" was not accurate. The company has restructured its finances at least twice and is in a healthier financial situation, he said.

"We will follow the law no matter what it costs," Miller said.

Asked whether ratepayers would bear the cost of compliance, Miller noted that a greater shift to renewable energy, such as wind, would entail greater costs to customers, too.

"Gas and wind are going to raise rates, too," he said. "Coal is the cheapest thing we can deliver."

Miller said the company would not shy away from tough questions from a congressman.

Kansas House Speaker Melvin Neufeld, an Ingalls Republican and a supporter of the expansion, reviewed the letter briefly and handed it back to a reporter, saying, "I don't really care what Washington does."

Many scientists agree that the United States needs to cut its greenhouse-gas emissions by 80 percent by 2050, or about 2 percent a year, to avoid the worst consequences of climate change. To achieve those reductions, concerned officials are looking to coal-fired power plants, which are among the largest emitters of carbon dioxide.

Last week, three leading financial institutions on Wall Street announced they had adopted guidelines to address the financial risks associated with climate change regulatory policy.

The private bankers now are recognizing that carbon regulations are "highly likely to be imposed in the near future, and they are accounting for those costs in their private calculations," Waxman wrote. "I am concerned, however, that RUS may not be applying similar safeguards when it loans out taxpayer dollars."

Waxman's committee asked the agency for numerous financial documents, including some that pertain specifically to Sunflower. Among them are an analysis of the possible impact that potential government regulations could have on electricity rates for Sunflower's customers.

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Senate acts

Kansas Senate passes legislation clearing the way for expansion of the western Kansas coal plant. -- B11

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Kansas Senate backs expansion of coal plant TOPEKA -- One chamber down, one more to go.

By a 33-7 vote, the Kansas Senate on Thursday passed legislation clearing the way for the expansion of a western Kansas coal plant. The legislation now goes to the House, where members are working on similar legislation.

A veto by Gov. Kathleen Sebelius is almost certain. It takes a two-thirds vote in each chamber to override.

How area senators voted:

Republicans voting yes: Barbara Allen and Dennis Wilson, both of Overland Park; Nick Jordan, Shawnee; Karin Brownlee and Julia Lynn, both of Olathe; John Vratil, Leawood; and Roger Pine, Lawrence.

Democrats voting yes: Mark Gilstrap and David Haley, both of Kansas City, Kan.

Republicans voting no: David Wysong, Mission Hills.

Democrats voting no: Chris Steineger, Kansas City, Kan.

To reach Karen Dillon, call 816-234-4430 or send e-mail to kdillon@kcstar.com. To reach David Klepper, call 785-354-1388 or send e-mail to dklepper@kcstar.com. -- David Kle