Unit 5 is 50 years old. The steam generator was used about 20 to 30 days during the last year. It's due for an inspection and overhaul that could cost a half to more than three-quarters of a million dollars.
City officials say it's worthwhile to spend the money to keep the city's only stand-alone electric power generator in service.
The city is capable of producing all the electric power it needs, using the 14 megawatt No. 5 unit along with two 7.8 MW dual fuel (natural gas or diesel) units, purchased about 10 and 20 years ago. Currently, the market favors purchasing power, City Manager Dave Howard said.
The old steam unit is used when power is interrupted from suppliers, because of a storm or scheduled maintenance and when the demand is high, such as during a hot summer, Howard said.
Because it is steam-powered, it takes a day or two to bring it up to full operating capacity; however the two dual fuel generators can go online within 20 to 30 minutes. The two smaller generators ran nearly every day during the hot summers of 2011 and 2012, but less this past summer, Howard said.
The ability to produce its own power allows the city to get a more favorable contract with KMEA, its energy marketer, buying electricity economically, and offering its generating capacity when needed.
Over the past five years of the agreement, the city has received about $628,125 reduction in billing, according to a report presented by Kelly Hemphill, director of electric utilities, at Monday's City Commission meeting.
The city's insurance company requires a periodic inspection of the generating unit, which amounts to tearing it down. That process alone is expensive, Howard said, and it makes sense to make any needed repairs at that time.
Hemphill has prepared specifications and bids will be opened in December. An extensive report on Monday was intended to make sure all commissioners are knowledgeable about the process by which Pratt produces and obtains its power, and so they won't be shocked at the price of the overhaul.
At an October meeting, Hemphill said costs could go as high as $950,000, which also included some auxiliary work. In a telephone interview this week, Howard put the cost at from $400,000 to $800,000.
"We won't know the cost until we get into it," he said.
If the unit is overhauled, the city could receive $1.86 million in capacity payments between now and 2025, according to the report.
If the unit is not overhauled, that $1.86 million would not be received and the city would have to spend $2.9 million to purchase capacity — enough power to guarantee it could meet electrical needs. The purchase price would depend on how much excess capacity is on the market, Howard said, and right now the market is tight.
Also, if the unit does not remain in service, the city would not be able to produce enough electricity to supply the entire city if transmission from outside sources were lost because of a storm or mechanical failure.
If parts of the town were without power for two to three days, the economic ramifications would be severe. Howard predicted businesses could lose hundreds, maybe thousands of dollars a day and some people would lose wages for the days they could not work.
The electric department has been budgeting for the overhaul of Unit 5 for at least 10 years, Hemphill said, and has already started setting money aside for overhauls of the two newer units, which won't happen for 10 to 15 years.
"If you budget properly, you have the money to do it without doing a rate increase," Howard said, adding that city electric rates have not increased since 2007, in part because of its ability to generate power.
The energy market is changing, Howard said, and it is "not out of the realm of possibility we'll be running that (Unit 5) in the future."
Hemphill predicted the overhauled unit could remain in service for as many as 30 years; however Howard said that would depend on how often it is used.