STARKVILLE – Although a final decision is probably still a month away, members of the Tennessee Valley Authority’s board of directors appear ready to sign an agreement that would commit the federal utility to purchasing power from a proposed $500 million coal-burning plant and mine in Mississippi.
“I’m very optimistic, more optimistic than I’ve ever been,” said TVA Chairman Craven Crowell following a meeting of the board in Starkville Wednesday.
TVA, which provides electrical power to a seven-state region, including north Mississippi, had earlier indicated that it needed a commitment for extended contracts from each of its 28 power distributors in the state in order to make the deal with Phillips Coal Co. and CRRS Capital economically feasible.
To date, 23 of those distributors have agreed to the contract extensions, and Crowell said he expects only one not to sign.
“I think we know who that is,” he said, referring to 4-County Electric Power Association in Columbus, which is suing TVA to get out of its contract. 4-County contends TVA’s almost $30 billion debt makes it an unreliable power source for any long-term commitments.
Crowell said he believes the TVA board will approve the purchase agreement with the proposed power plant without 4-County’s participation.
“My position is, if we have 27, we can go with it,” he said.
“Five and dime”
Tupelo is expected to agree to the contract extension, although the City Council has not yet formally approved it, according to Johnny Timmons, director of the city’s Water & Light Department. The council is expected to vote on the matter at its May 21 meeting.
Oxford agreed to the extension last week, according to Johnny Earnest, director of that city’s electric department.
The distributors originally balked at TVA’s demand for a 15-year contract in order to ensure enough demand to make the purchase agreement economically feasible. But at a meeting between TVA Director Johnny Hayes and all 28 distributors in Tupelo in April, an alternative that came to be known as the “five and dime” was proposed by the distributors and agreed to by TVA.
Under that proposal, the distributors would sign a letter of agreement, but not an actual contract, that they would not attempt to cancel their contracts for five years and after the five-year period would agree to a normal 10-year contract.
“It gives them some flexibility and us a long-term commitment,” Hayes said at a briefing in Webster County Wednesday where the three TVA directors met with local officials and discussed the possible site of the power plant.
Two locations about 15 miles apart are under consideration, and officials said both have the same attributes with one notable exception. One site covers 13,000 acres in Choctaw County and contains 164 million tons of lignite coal. The other is on 45,000 acres in Webster County and contains 610 million tons of the coal that will be mined and used to fuel the power plant.
“The plant requires 100 million tons” over its projected 30-year life span, said Bill Museler, TVA senior vice president in charge of transmission and power supply. “So there is a plentiful supply in either area.”
But officials appear to be using the site selection process to influence 4-County’s decision to break ranks with the federal utility. While noting that both sites were equally attractive, officials pointed out that the Webster County site is served by the Natchez Trace Power Association, which has already agreed to the 15-year contract extension.
The Choctaw County site is served by 4-County.
The county where the power plant and possibly an adjacent industrial park will be located stands to reap an economic windfall from the project. The lignite mine is expected to employ 200 and the power plant 100 for a combined annual payroll of $10 million. That would amount to about a $5 million increase in the local tax rolls and about $2 million in state taxes.
Crowell said the TVA board would await the recommendation of its staff before making a final decision on buying power from the plant and where it would be located. Phillips and CRSS have said TVA’s participation is essential for the project to proceed even though the state Legislature has appropriated $30 million to assist in infrastructure improvements around the site.
Crowell indicated Wednesday that the deal was as good as sealed.
“We anticipate getting a recommendation from our staff very shortly and going forward with this project,” he said. “This project must stand on sound business decisions, and we’re at the point where I believe it is a sound business decision.”
Museler said a final recommendation would probably come in about a month.
“We’re trying to finalize negotiations with all of our distributors and (a final recommendation) should be able to happen somewhere in the time frame of the next three to five weeks,” he said.