What is Ohio Citizen Action?

The organization has been in existence since 1975. They describe themselves as providing "door-to-door democracy." The grassroots organization, largely made up of volunteers, uses a variety of avenues to draw attention to the issues they choose to take on. A perusal of the OCA Web site would show that the organization has a variety of campaigns currently underway opposing projects, companies or issues.

Like most activist groups, OCA is dependent upon voluntary donations to the organization. It would appear that they use the various issues of which they oppose as motivators for their fundraising efforts. We know that as OCA volunteers have been going door-to-door in AMPGS participating and other communities, they have in many cases been asking for donations of varying dollar amounts.

Anticipated Issues

"Participating communities locked into a 50-year contract"

AMP-Ohio has executed valid contracts with 81 member communities to purchase power from the facility for a 50 year time frame. These contracts are necessary on a project of this size and scope and support the affordable financing of the project. There are several things to keep in mind:

The contracts assure that participating communities have access to reliable power at predictable costs well into the future.

None of the participating communities are getting 100 percent of their base load power from this project. This means that there is still room in portfolios for additional renewable generation and/or energy efficiency programs.

The feasibility studies completed for this project, the results of which have been examined by numerous consulting firms with specific industry expertise, have shown that the cost of power coming from the plant will be at below market rates through the life of the plant.

AMPGS is a state-of-the-art project with carbon capture and sequestration potential when it becomes technologically and economically feasible.

Communities have signed take-or-pay contracts"

All 81 participating communities executed take-or-pay contracts for this project. This mechanism is not an AMP-Ohio creation, but a standard contractual mechanism for these types of projects. These contracts allow AMP-Ohio to secure the most affordable financing for the project. In essence, the contract mechanism makes the AMPGS project similar to any significant building project that a municipality might take on. For example, if a community builds a new water treatment plant, they assume the risk that the project will proceed as expected and will operate as intended - it's an owned asset. In this case the risks involved in building a large, reliable generation source are shared amongst all of the participants - communities will own a proportional share of the project through AMP-Ohio.

AMP-Ohio has used take-or-pay contracts with existing projects, including the Belleville Hydroelectric Plant, which has been operating for 10 years at below anticipated costs, and the AMP-Ohio Wind Farm. Other projects currently under development by AMP-Ohio, the Prairie State Energy Campus and the hydroelectric projects, are also being developed under take-or-pay contracts.

"Projected project cost has escalated"

This is a continuing theme with OCA. Here are the facts. When the AMPGS project was announced in Meigs County in October 2005, the estimate of $1.2 billion was used. This was an "off the shelf" estimate provided by Sargent and Lundy, the consulting firm that performed the original feasibility study. The estimate was generic for a plant of this type and size and did not include information specific to the AMPGS project, nor did it include all of the elements of the project (i.e. transmission line and interconnection costs). Cost projections have been updated based specifically on the AMPGS project and on indicative pricing received from Bechtel Power, the engineer-procure-construct (EPC) contractor.

The latest estimate for the project is $3.074 billion, which is a decrease from the estimate provided to participants in October 2008 of $3.25 billion. This figure includes the cost of utilizing Powerspan's ECO SO2 scrubbing system and contingency and cost escalation funds to further protect project participants. Feasibility studies have demonstrated that power from the plant will be below the cost of market power. It should be noted that we are seeing a significant softening of the commodities market related to steel and other construction raw materials. This market softening is related to the current economic downturn. We have already seen a positive impact on AMP-Ohio's hydroelectric project from the market condition. The commodities market softening is not reflected in the latest cost estimate, which was revised downward from October.

"Financing costs"

AMP-Ohio has positioned itself well in terms of the AMPGS project. Our commercial paper program and line-of-credit give us the ability to wait for the optimum time to go to the bond market for permanent financing. We're not being forced into the market prematurely. Despite the downturn in the economy, AMP-Ohio issued $1 billion in project financing in 2008, including issuing $760 million in bonds for the Prairie State coal generation project issued at below anticipated rates. At the time of that Prairie State initial bond sale, Ohio Citizen Action was claiming that no one would finance or invest in coal projects. Earlier this year AMP-Ohio issued $350 million in bond anticipation notes as interim financing for the hydroelectric projects, these too carried a very affordable interest rate.

"There have been schedule delays"

AMP-Ohio staff and consultants have taken the time to perform due diligence on this project, particularly in terms of the use of Powerspan technology. A great deal of examination was done to confirm the viability of this technology for the AMPGS project. Additionally, there is a tremendous world market impact on steam turbine manufacturers who are currently overwhelmed by power plant development in other countries, this has led to a six month extension on the original project schedule, meaning both units are scheduled to begin operation in 2014. This is a conservative schedule.

"There are alternatives"

There are indeed alternatives, however, the groups opposing the AMPGS project have not provided much detail about the alternatives they keep saying exist. What opposition groups don't seem to understand about AMP-Ohio is that we are truly partners with our member communities. The organization is owned by its members and the members control the organization through the 16 member Board of Trustees. The organization's principal mission is to secure affordable, reliable wholesale power for our members. Obviously, we've examined the alternatives to the AMPGS project and conducted significant due diligence.

Build renewable generation resources. AMP-Ohio and our members are leaders in the region in terms of the deployment of renewable resources. We understand the benefits of these projects - and the limitations. Simultaneously with the AMPGS project, AMP-Ohio and our members are embarking on the largest deployment of run-of-the-river hydroelectric generation in the nation. In fact, construction started at the first of these projects, located at the Cannelton Locks and Dam on the Ohio River on May 15. In total, our planned effort at six sites will add more than 380 MW of renewable hydroelectric generation to the region. We are also exploring opportunities for new wind and solar generation projects. In this part of the country, hydroelectric generation has a capacity factor of about 65 percent, wind 25 percent, and solar 10 percent. While these resources are important components of a balanced generation portfolio, they cannot be relied upon by themselves for base load power.

Purchase power agreements. AMP-Ohio members have relied primarily on market purchases to meet their power supply needs for the last 35 years. This strategy worked well in the past, but dramatic changes in the industry have left member communities overexposed to an increasingly volatile wholesale market. Currently, 62 percent of members' base load and 90 percent of intermediate power needs come from the market, giving communities very little ability to control power costs. Long-term, fixed-rate purchase power agreements are indeed rare and not attractively priced, if available at all. AMP-Ohio knows this because we have been negotiating power supply contracts for over 30 years.

Energy efficiency is also an important component of a power supply strategy. AMP-Ohio is working to launch a major expansion of our energy efficiency program with the goal of becoming a national leader in energy efficiency. However, experts agree that you can expect 1-1.5 percent annual reduction in load through aggressive energy efficiency programs. This will mitigate future load growth, but will not reduce current over exposure to the wholesale market.

Do nothing. As noted above, members are overexposed to the market giving communities little ability to control power costs. Also it should be noted that the vast majority of the market power purchased by member communities comes from older, dirtier coal-fired power plants.

"Emissions from the AMPGS plant"

The AMPGS facility, complete with state-of-the-art, proven emission control technology, which includes the use of Powerspan, will be the cleanest coal-fired generation facility in the region and one of the cleanest of its type in the nation. The use of Powerspan, which was included as a condition to the Certificate of Environmental Compatibility and Public Need issued for the project by the Ohio Power Siting Board, not only provides best available control technology for the plant, but also positions us well for possible carbon capture in the future. A commercial pilot of Powerspan's carbon capture technology is currently underway at the R.E. Burger Plant in Shadyside, Ohio. Data from the pilot is being collected and shared with AMP-Ohio. As noted before, participation in the AMPGS project will actually reduce the overall emissions footprint of participating member communities who are currently purchasing the bulk of their base load power on the market from older, dirtier plants.

"Permits for the plant are being appealed by environmental groups"

The air and National Pollutant Discharge Elimination System (NPDES) permits have been appealed by a consortium of environmental groups, but Ohio law allows us to continue development through the appeals process. The hearing on the air permit is scheduled to begin in August before the Ohio Environmental Review Appeals Commission; and the hearing on the NPDES permit is scheduled to begin in January 2010. AMP-Ohio anticipated these appeals and has prepared accordingly.

"AMP-Ohio is seeking state incentives and say Ohio is competing with West Virginia"

When the list of potential sites for the AMPGS project was narrowed down to the final four, one of the potential sites was in West Virginia. Obviously, AMP-Ohio is now committed to Meigs County for the build option. However, there remain other options for partnering in other generation projects under development in other states, including West Virginia. While at this time, that has not been identified as the preferred option, it remains under investigation.

The AMPGS project represents a significant investment in the state of Ohio. It is wholly appropriate for AMP-Ohio to seek state incentives in support of that investment.

"The air permit for the facility is being modified and is subject to another public hearing"

The Ohio EPA recently issued a draft clarification through administrative modification to the air permit-to-install (PTI) for the AMPGS project. The action stems from a federal court decision last year, which vacated the federal clean air mercury rule after the final air permit was issued for AMPGS. AMP-Ohio notified participants in the AMPGS project last July that the Ohio EPA had asked for additional information related to control of mercury and other hazardous air pollutants (HAPs). The update was not unexpected. The PTI issued by Ohio EPA in February 2008 contained a specific limit on mercury emissions - limitations that are more stringent than what was contained in the federal clean air mercury law, and among the most stringent in the nation. The draft administrative modification sets the case-by-case maximum achievable control technology (MACT) for mercury consistent with the emission limit already established in the AMPGS PTI. The draft administrative modification did lower emissions limits for two other pollutants, hydrogen fluoride and hydrogen chloride. AMP-Ohio does not anticipate these lowered emission limits having an operational impact on the proposed facility. The draft administrative modification confirms that all other HAPs limitations contained in the PTI represent MACT standards. A hearing on the draft took place in Meigs County on June 2nd.

"Mountaintop mining"

OCA has made mountaintop mining a major campaign for its organization. No decisions as to the specific sources of coal for the AMPGS project have been made and no contracts have been signed. The AMPGS Participants Committee will make decisions regarding fuel sources.

"Coal ash ponds"

The OCA has placed stories regarding last year's event at a coal ash pond in Tennessee on their Web site in a section called "More on AMP-Ohio Proposed Coal Plant." The AMPGS facility will NOT utilize a coal ash pond. Ash waste will be processed dry and taken directly to the on-site landfill.

"AMP-Ohio has received a notice of violation (NOV) from the U.S. EPA on the Richard H. Gorsuch Station"

This quickly became a significant target for OCA and gave them another excuse to criticize the organization. AMP-Ohio recently received a Notice of Finding of Violation from the U.S. EPA with regard to the Richard H. Gorsuch Generating Station (RHGS). The facility has been and remains in compliance with all limitations contained in our operating permits. The investigation by the USEPA is related to modifications completed at the facility, some of which go back to 1981, pre-dating our ownership. The notice was addressed to both AMP-Ohio and the station's former owner, and later our co-owner, Elkem Metals. Specifically, the NOV cites work performed at the facility in the 1981-1986 timeframe (prior to AMP-Ohio ownership) and projects performed in the 1988-1991 timeframe. A primary part of the later projects was performed to decouple the electric generation from the process steam production at the plant.

It is important to note that the Gorsuch Station is in compliance with its operating permits. AMP-Ohio has responsibly operated the Gorsuch facility since taking ownership and we have made a number of improvements at the facility that have actually reduced emissions.

"There is a great deal of legislative/regulatory uncertainty"

This is true. We are most likely going to see climate change legislation and other pushes to limit greenhouse gases, including carbon dioxide. Nobody has a crystal ball. We do know that whatever is passed at the federal level will affect the industry as a whole, not just our project. AMP-Ohio and OMEA are fully engaged in this issue and are working with like-minded entities across the country on workable solutions. Our choice of Powerspan technology has well positioned us for a future carbon-constrained industry in terms of the AMPGS project. The footprint of the facility and the placement of equipment and other engineering aspects of AMPGS will facilitate future carbon capture. The feasibility study and subsequent updates have factored the cost of future carbon regulation into the financial modeling.