The City of Union will get more than $1.5 million and could save up to $400,000 a year on the wholesale cost of electricity by selling its peak power generation plant to Lockhart Power, utility director Joe Nichols says.

Union City Council voted unanimously Tuesday morning to approve first reading of an ordinance authorizing the sale of the facility to Lockhart Power. Council also voted unanimously to authorize Mayor Harold Thompson to enter into a power purchase agreement between the city and the company as part of the sale.

Nichols told council that Lockhart Power will purchase the plant for $1,510,000; will pay the city an annual capacity charge of $50,000; and an annual maintenance charge of $25,000. The company will also pay for the diesel fuel used by the facility.

Located at 198 Times Boulevard, the plant was built to provide power on a monthly basis during peak generating periods. The power generated by the facility is purchased by Duke Energy through Lockhart Power. Union buys its electricity from Lockhart Power which gets part of its power from hydroelectric generation and the rest from Duke Energy.

Finance director Walker Gallman that because of the power generated by the facility the city has not had to raise electricity rates since 2003. Nichols said that within a relatively short period  of time after the sale is completed, the city could begin realizing annual savings of up to $400,000 on its wholesale cost of power.

“The benefit to the city is in the wholesale cost of service agreement which will reduce the rates our customers pay for electricity when the one year peak is met with Duke Energy,” he said. “This benefit going forward each year will be approximately $400,000.”

The offer to purchase the facility grew out of a new 10-year agreement between Lockhart Power and Duke Energy. Nichols said the new contract includes the power generation provided by the city facility. He said Duke Energy will have the right to dispatch power generation at the facility for up to 12 hours a day or a total of 150 hours over the June-September time period. For the rest of the year, the generators will only operate during testing periods.

 The sale, which is scheduled to take place in December 2010, must still be approved by the Federal Energy Regulatory Commission and the South Carolina Public Service Commission. The city will continue to operate and maintain the generators until the sale is closed, at which time Lockhart Power will be responsible for the facility.

Buffalo surcharge

A $10 surcharge paid by the residents of Buffalo for water and sewer service could soon be a thing of the past.

Council voted unanimously Tuesday authorize the mayor to provide a cash match of $50,000 for a $500,000 Community Development Block Grant (CDBG) to upgrade Buffalo’s sewer system.  The upgrade will include the construction of 705 linear feet of two-inch and 2,330 lineal feet of eight-inch sewer line; replacement of 20 manholes; excavation and resurfacing.

The motion also authorized Thompson to provide any additional funds necessary to complete the project.

Union has operated Buffalo’s water and sewer system since it acquired the old Buffalo Water and Sewer District in the mid-1990s. To help cover the cost of the upgrade, the city levied a special $10 a month surcharge on customers in Buffalo. Though the surcharge generated some revenue, it did not generate enough to cover the cost of the improvements which the city has financed with CDBG and utility funds and loans.

Gallman said that once the upgrade is complete, the city would be able eliminate the surcharge. The project will only proceed if the city is awarded the grant.