Power plant in Holland, Mich., prepares to retire $91 million of debt this year
March 9, 2021
by Paul Ciampoli
APPA News Director
March 9, 2021
Holland Energy Park (HEP), a power plant in Holland, Mich., is preparing to retire $91 million of debt this year, during only its fourth year of operation, pending final approval from the Holland City Council.
Additionally, there is a plan to retire an additional $40 million over the next two years, completely retiring the debt in a total of nine years since it was issued in 2014, the Holland Board of Public Works (BPW) said on March 8.
The $240 million power generation facility was financed with $160 million of debt and $80 million of reserves.
Originally, the Holland BPW planned to service the bonds for 25 years. Retiring the debt early will save tens of millions of dollars in interest.
The reduced cost results in a proposed rate decrease of about 10% for Holland BPW electric customers.
HEP is a combined-cycle power plant that produces electricity using natural gas. The plant has strengthened the community-owned electric utility since it came online in 2017, Holland BPW noted.
HEP provides the Holland BPW with more electricity than is needed, allowing excess capacity to be sold to other providers in Michigan.
The utility and the City of Holland have received significant value from selling HEP’s excess capacity, Holland BPW said.
In 2018, Holland BPW was able to reduce electric rates by an average of 6% for customers. This year, Holland BPW electric customers will receive another rate reduction, the second reduction in three years.
Also, the wholesale revenue made possible by HEP has allowed the Holland BPW to increase its annual contribution to the City of Holland from $6.6 million to $8 million.
Holland BPW said its electric rates rank among the lowest in Michigan. This year’s proposed rate decrease, which averages 10% across all customer classes, will save the average residential customer about $60 on their energy charges over the year.
If approved by the City Council in May, the new rates will go into effect on July 1, 2021.
The average Holland BPW residential customer now enjoys nearly a 40%, or $35 per month rate advantage to the investor-owned utilities in Michigan, Holland BPW noted.
Environmental paybacks are proven through reduced carbon dioxide emissions, the utility said.
HEP, along with investments in renewable energy sources, reduced CO2 emissions from Holland BPW’s portfolio by 46%. Additionally, HEP “has virtually eliminated emissions of sulfur dioxide, lead, and mercury from power generation sources in our community,” Holland BPW said.