Tuesday, October 14, 2008
BTU opposes TMPA debt restructure
AUSTIN – In a move that could increase by nearly $100 million the costs that Bryan Texas Utilities ratepayers will pay, the Texas Municipal Power Agency decided Friday to restructure and extend its debt.
Currently scheduled to be repaid in full by 2018, the proposed restructure would extend the debt to 2030 at a higher interest rate. BTU estimates its share of the increase to be in excess of $95 million. If the Texas Municipal Power Agency were required to pay interest of 8 percent, Bryan’s added debt service cost would be more than $130 million, potentially chargeable to BTU and its ratepayers. TMPA’s other member cities also will see increases.
Texas Municipal Power Agency is a joint organization authorized by the Texas Legislature in 1976 and created by its member cities, Bryan, Denton, Garland and Greenville, to construct the Gibbons Creek Power Plant. Bryan and the other cities are obligated by contract to purchase a portion of their electric power from TMPA.
At Friday’s meeting, L. Gene Kornegay, a board member appointed by the City of Bryan, spoke against the resolution, noting that TMPA’s current debt is more than three times its net asset value.
“Every household in the country knows two simple economic principles: The first is that it is not a good situation when your mortgage exceeds the value of your home. The second is that when you lower your credit card payment, you end up paying lots more in interest and finance charges, for a longer time,” he said. “Both these simple principles apply to the bond restructure the board is asked to approve today.”
The resolution passed in a 6-1 vote. TMPA filed a bond validation lawsuit last week in a Travis County district court, seeking a declaration that the agency’s actions were valid. Bryan is challenging the actions in that lawsuit.
BTU General Manager Dan Wilkerson said that in the next few years, the plant will likely experience increased coal transportation and environmental emissions cost. Those factors, coupled with cheaper wind generation coming online in Texas, when added to the increased debt burden, may make the Gibbons Creek plant uneconomical to operate after 2018, Wilkerson said.
“This action is not in TMPA’s best interest,” Wilkerson said, “nor in the best interest of Bryan and its ratepayers.”
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