POWER TO THE PEOPLE: JACKSON ENJOYS PERKS OF OWN GENERATING PLANT

JACKSON, Mo. -- During a heat wave in the summer of 1999, electrical power that normally costs about $40 per megawatt hour jumped in price to $10,000 per megawatt hour during a period of peak demand. The City of Springfield, Ill., had to buy power at the high price and lost millions of dollars in a matter of days.

Such is the volatility of an electric power market expected to become even more volatile with deregulation of the industry looming in the next 3 to 5 years. But the positions of Southeast Missouri cities like Jackson and Sikeston are more secure because they operate municipal utilities capable of producing their own power.

The City of Jackson has always had an independent streak. The city fathers opened the Jackson Municipal Power Plant in 1908. When buying power became cheaper than producing it in the 1950s, many cities sold their utilities to large companies. Jackson did not.

In 1957, the city stopped producing electricity for its own needs and started buying cheaper power from commercial sources. The city now buys 90 percent of it's power from Sikeston, Jonesboro, Ark., and from AmerenUE. The remaining 10 percent is generated for the city's use during peak periods to keep from having to pay the high costs suppliers charge during those periods.

The Jackson plant only operates when a peak period is at hand. "When peak usage goes above 28,000 (kilowatts), we start firing up those generators," said Jim Roach, the city's public works director.

In 1993, Jackson's peak load was just below 26,000 kilowatts during a 106-degree day. As an illustration of the city's growth, this year the city's peak load during a 101-degree day was 35,700 kilowatts, meaning the city had to generate an extra 9,000 kilowatts.

The city also can sell any excess power generated during those peak periods. "AmerenUE looks for backup generation and they'll pay a premium for that," Roach said.

Last year, Jackson's nonprofit utility returned about $750,000 to the general fund that was used to hold down personal and property tax rates. Jackson also doesn't have a tax for public safety as some cities do, and residents don't pay for trash pickup thanks to the municipal power plant.

"It has paid off," Roach said.

California, where utility deregulation already is in effect, has seen price spikes and rolling brownouts. Price increases of three to ten times normal have been reported.

The City of Jackson opposes deregulation, Roach said, but is preparing as if it's inevitable.

The supposition is that residential prices will go up and commercial prices will go down. When deregulation comes, large companies like Wal-Mart will be able to negotiate for the best power price and buy electricity from the cheapest bidder. The City of Jackson would still be able to charge a fee for providing the delivery system. That fact and the city's fast-growing population are the reasons the city has been investing in poles and wires recently.

"In a deregulated market, distribution might be the area most profitable to the city," Roach said.

The city's nine generators burn diesel fuel but also can operate on natural gas, giving it the flexibility in case oil prices skyrocket.

Having the capacity to generate power gives the city a tremendous advantage negotiating contracts for buying power, Roach says. "We don't have to buy the expensive stuff." The city negotiates for 5-to-10-year blocks of power, the most any power-producing entity will go for these days.

Electricity comes into the city via the AmerenUE line that can be seen on East Jackson Boulevard near the Buchheit store entrance. The city is negotiating with AmerenUE for a second feeder line that not only would provide a backup in an emergency but also would enable Jackson to use both lines, helping accommodate its continuing growth.

That extra feeder line would cost about $1 million.

Jackson's current system is dependable, Roach says, and in an emergency in which all outside power was cut off could for awhile generate enough electricity to sustain rolling brownouts.

Roach points out that the plant is able to keep Jackson's rate competitive with other cities and provide revenues.

The municipal utility in Sikeston generates all the city's electricity except for peaking power purchased from the Southwest. Sikeston's coal-burning plant is so big it can sell power to other cities throughout the Midwest and keep the city's residential cost per kilowatt hour to a very low 5.1 cents. That compares to 6.9 cents in Jackson and 6.97 cents for residential customers in Cape Girardeau, which has no municipal power generating facility.

Rick Landers, who oversees the Sikeston distribution system, says it's a good business for cities to be in. "Look at Cape Girardeau. They don't have any say in the matter," he said. "Jackson has a hedge. They know what the highest costs are going to be."

Cape Girardeau's electricity has always been provided by private companies.

Michael Miller, Cape Girardeau's city manager, agrees that his city must rely on the state to regulate rates but says the major benefit of municipal ownership has to do with the revenue it produces more so than the control of rates.

Jackson got into the power business in 1908, Sikeston in 1931.

Building a power plant today would be prohibitive, Roach said. "To start from scratch, the capital costs would be tremendous."