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A watershed decision.

Desha County Awaits PSC on $192 Million Hydroelectric Station

HOPE FOR AN ECOnomic revival in Desha County could sink or swim with the fate of a proposed hydroelectric generating station on the Arkansas River.

The state Public Service Commission, however, might decide that the needs of the many outweigh the needs of the few.

As the proposal stands, the Arkansas Electric Cooperative Corp. would spend $192 million to build the generating station at Dam No. 2 northeast of Dumas, pumping roughly $20 million in salaries into the local economy during the four-year construction period.

The project would generate about $1.4 million a year in taxes for the county, 85 percent of which would be turned over to a local school district, Desha County Judge Mark McElroy says.

There's just one problem: Before the county's residents starting popping open champagne, they have to convince the PSC staff--ominously known as "Staff" without a "the" in front of it--that the project is justifiable.

In 1990, the AECC negotiated itself into a corner with the staff, which had suggested a rate reduction to cut $18.5 million a year in over-earnings. The cutback eventually was reduced to $10.2 million so the AECC could build up equity.

In exchange, the AECC gave the commission the final veto power on the future construction of the Desha County generating station. Normally, the PSC does not have the right to review hydro-electric energy projects.

Supporters of the Desha County effort say they received a cool reception from PSC staff members during a recent informal meeting to discuss the project.

"We advanced the position that it would create |hundreds of~ jobs in a very depressed area," says state Rep. Charlotte Schexnayder of Dumas. "They were less than enthusiastic. The river has caused us so much headache over the years with flooding and other things that when we see a way to gain advantage from it, we want to do it."

Will the Whole State Benefit?

Schexnayder and others say the staff is balking at the new hydro project because AECC already has a surplus of electrical generating capacity and the new generator would raise electric rates until the project is paid off in 20-30 years.

Diana Brenske, manager of electric utilities at the PSC, says the staff has employed an independent consultant to examine the hydroelectric proposal. No position has been taken on the issue, and the staff doesn't plan to file testimony with the commission until November.

Carl Whillock, president and chief executive officer of AECC, says consumer electric rates would have to rise 3 percent to pay off the Dumas generating station by the year 2025. But he says the long-term savings on energy costs would be well worth it because AECC would save $8.5 million to $9 million a year in the cost of purchasing coal.

He predicts that the project will produce energy at a cost of 7.2 cents per kilowatt-hour upon completion and then drop sharply to 2.95 cents when the project is paid off. Meanwhile, he says, the cost of coal-generated electricity will be going through the roof, from 4.5 cents to around 20 cents.

In Whillock's view, there are other reasons to pursue hydroelectric power.

"I'm told by officials at the Federal Energy Regulatory Commission that there are about 1,700 hydroelectric projects operating in the country," he says. "Of those, over 1,200 of them have been operating for more than 75 years. They are going to be there forever."

AECC, the wholesale power supplier for 16 of the 17 electric cooperatives in Arkansas, already operates a 32.4 megawatt hydroelectric generating station near Barling (Sebastian County) and will open another 32.4 megawatt hydro plant at Morrilton in October.

The Desha County generating station plants is projected to produce 120 megawatts of power -- enough to accommodate 25,000 homes. Every watt means money to the county's struggling economy.

With 330 students and an annual budget of only $1.12 million, the Delta Special School District of eastern Desha County could double its revenues when the generators start to turn. One can only imagine the impact on a future generation's quality of life.

"If we had additional monies, we would probably expand the curriculum first," says a cautiously optimistic Ronald Smead, superintendent for the Delta Special School District.

The remaining proceeds from the local property tax would go to the county general fund.

Hoping for Development

But the biggest benefit for Desha County could be enhanced standing in the world of industrial recruitment.

"We've just recently opened a port in our county," Judge McElroy says. "Development of that port will hinge on that power."

Right now, the rural county is very dependent on the PSC staff's decision.

"We're hoping the staff will be open-minded about this," McElroy says. "I understand the PSC is looking at it from the service end of it, and they want to make sure the customer is protected."

The AECC actually received a license to build the Dumas generating station in 1981 from the Federal Energy Regulatory Commission. The license requires work to begin on the project by Aug. 10, 1994, but the compromise with the PSC jeopardizes the project.

The AECC was given a reprieve on consumer rate cuts to prepare for the possibility that the Rural Electrification Administration might someday be unable to provide loans. The PSC staff was trying to be cautious, yet helpful.

"We thought their equity plan was appropriate, but we did not want them to dip into those funds to build hydro plants," Brenske says. "We have no reason to believe that they are, but that's one of the things we'll be looking into."

"They're asking us to approve this project based on energy savings in the future," Brenske says. "Typically, we consider both the need for the capacity as well as the reduction in fuel costs. We've also agreed to consider the environmental aspects of a hydro as well as the economic impact of building the hydro in Arkansas."

Schexnayder says the Desha County team is "arguing for the 21st century" and not just the foreseeable future.

"In the Delta," she says, "we can't afford to think any other way but long term."
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Title Annotation:Public Service Commission approval needed in the construction of hydroelectric power plant in Desha County, Arkansas
Author:Haman, John
Publication:Arkansas Business
Date:Aug 30, 1993
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