Methane generator proposal advances

By Larry Peirce
Banner-Press Editor

David City now has a shot at becoming the only city in the state to take longterm low-cost advantage of burning methane gas from a landfill for electric power generation.

The City Council voted 6-0 on Aug. 12 to move forward with a plan to purchase a methane powered electricity generator in order to supply electricity to Nebraska Public Power District.

City Administrator Joe Johnson said the plan, which will cost $1.6 million up front, is "risk-free" because it will not be carried out unless NPPD carries through with a pledge to purchase power from the city at a rate of 8.1 cents or more per kilowatt hour.

The methane generator was made available through Caterpillar and NMC Power Systems. It is a 2008 model, allowing the city to save an estimated $65,000 (an incorrect figure was reported in an earlier version of this story)  on the cost of a new model, which would also require a lengthy wait before it could be produced.

The methane - landfill gas - is available at the Butler County Landfill, which already supplies methane for burning in Henningsen Foods boilers. Timberline Energy worked in a partnership with the city and Henningsens to bring the methane pipeline to fruition in 2008. Timberline has said that more wells would be required at the landfill to produce enough landfill gas for power generation on top of Henningsen's needs. Currently, the extra methane extracted from the landfill is burned through a flare at the landfill site.

The generator purchase is "contingent upon successful project approval and negotiated agreements with NPPD to purchase electric energy produced by the methane gas generator.

The approval -- which followed an unsuccessful vote for approval in July because of a lack of a quorum - comes just before the city must present a "request for proposal" with NPPD by Sept. 1.

"This is a doable project right now only if NPPD signs on the dotted line," Johnson said. "Without accepting the bid, we can't submit an RFP."

While the cost of producing power is now higher than what the city pays under its contract with NPPD, the use of methane could enable the city to lock in rates that may someday be considered low. The city has a 25-year contract as a wholesale customer of NPPD.

"If we have this on the table 10 years from now we have a major bargaining chip if we go back to the negotiating table with NPPD," Johnson said. "That will forever keep our rates low."

Councilman Bill Scribner asked if the city could work out a plan with Butler Public Power District to cut the city's cost in half.

Johnson explained that the city would have no net costs.

"There is no cost to us. Our production costs will be paid by NPPD. There is no cost coming out of our fees. We are going to bond this out. They will pay our bond payment. We will set our rates equal to what our monthly payments are. There is no risk. If we have a contract with NPPD, our bills . . . will be paid off in ten years, and then it's ours for whatever we want to do with it at that point," Johnson said.

Mayor Dana Trowbridge opened the discussion by quoting from the Nebraska Municipal Power Pool's "Essent" newsletter. The executive director of NMPP highlighted the effects that climate change legislation could have on power rates.

Trowbridge cited the article as reason for concern that bulk power cost will rise dramatically in coming years, especially if federal "cap and trade" legislation is approved. He noted that some Missouri power companies raised their rates by 17 percent this year.

Councilman Gary Kroesing cited his concerns about the cost of operations, for fuel and maintenance of the generator. The costs would be too high for it to be considered as a replacement for the power the city now purchases from NPPD, which is around 4 cents a kilowatt hour.

Trowbridge said he agreed with Kroesing, but he noted that the methane generator is not meant to replace wholesale power from NPPD. It is intended to create power that NPPD may buy under its future plans to use more renewable fuels instead of burning coal.

Johnson said that NPPD added methane to its "request for proposals" because of David City's access to a methane source at the Butler County Landfill.

"Their brothers and sisters across the state, the big dogs LES and OPPD are both producing a ton of energy using methane. NPPD is falling behind and they are willing to pay an additional cost to get caught back up to those big dogs," Johnson said.

Citizen Carol Brehm, who works in an NMPP office in Lincoln, said she thought the purchase of the generator was too good of a deal to pass up.

She asked Johnson if he had a "feel" for whether NPPD would come through with a plan to use the city's power.

"I speak with them weekly on this subject," Johnson said. "We are their only community that has a supply of methane that they need to operate a generator. They don't have another community in western or the central part of the state that has this much methane. We are their key to getting into the methane energy business. That's why they added it to the RFP. I can tell you, the wind does not always blow.

They are not going to invest all of their funds or all of their money and resources into wind. Methane will help them diversify their use of renewable fuels and energy production."

The use of methane to generate electricity is part of a study approved 6-0 by the City Council at its April meeting.

The city hired Olsson Associates to look into the methane questions and the power buying arrangements between the city and Nebraska Public Power District, the Western Area Power Administration, (WAPA) and Butler Public Power District.

Regardless of whether methane use is expanded, the city may stand to save by investing in its own electricity infrastructure instead of BPPD's.

The city currently buys power from NPPD and WAPA, and the arrangement currently involves the city paying "wheeling charges" to BPPD for subtransmission and transformation on electricity the city uses.