meam

fyi.
---------------------- Forwarded by Lloyd Will/HOU/ECT on 03/05/2001 07:28 =
AM=20
---------------------------

"will lloyd" <lwill@houston.rr.com< on 03/04/2001 08:12:37 PM
To: <lloyd.will@enron.com<
cc: =20
Subject: meam

Delta Development
=09
=09
=09February, 1999 Issue
=09
=09Meam dispute reflects more issues than money =20
=09
=09BY NANCY cotten HIRST =20
=09Contributing Editor, Delta Business Journal
=09=20
=09
=09On the surface, the dispute between the Municipal Energy Agency of =20
Mississippi (MEAM) and the Clarksdale/Yazoo City alliance appears to be =20
about money and contracts. Yazoo City and Clarksdale say they are pulling =
=20
out of the eight-city energy-supply association because they can provide =
=20
power to their cities less expensively on their own.
=09
=09MEAM says that they have the right to do this, but only in accordance w=
ith=20
the original MEAM contract, which specifies that an entity can only withdr=
aw=20
from the agency on condition of five years=01, written notice. This provis=
ion=20
is typical of this type contract and lends a degree of stability to a=20
coalition of political bodies.
=09
=09Complicating the matter is the fact the MEAM has financed the upgrading =
of=20
the generating facilities at Yazoo City and Clarksdale. The total project=
=20
upgraded three frame-five gas turbines and added three waste heat recovery=
=20
steam generators and cost in excess of $10 million. Part of this project w=
as=20
paid for by MEAM revenues and the rest by a $5 million 1994 bond issue.
=09
=09The Greenwood generating facility was also part of this project, but =20
Greenwood elected to pay out of other resources rather than participate in =
=20
the bond issue. This leaves seven cities responsible for the bond issue an=
d=20
dependent on the generating capacity of the two cities for a portion of=20
their electrical power supply.
=09
=09MEAM also purchases power from other resources to supplement the genera=
ting=20
capacity of Yazoo City, Clarksdale and Greenwood. SEPA, Cajun Electric=20
Cooperative, Oklahoma Gas and Electric and Entergy Services, Inc. are amon=
g=20
recent suppliers with Entergy holding the largest contracts.
=09
=09The exit of Yazoo City and Clarksdale from MEAM would hurt the organiza=
tion=20
not only in loss of generating power but also in the loss of volume=20
purchasing power from other supplies. This type loss is one of the reasons=
=20
for a five-year notice in the original contract. The other cities involved=
=20
in MEAM would be given time to deal with the adverse impact.
=09
=09Clarksdale and Yazoo City, however, say that MEAM has broken its contra=
ct=20
with them. The two cities plan to form their own alliance to take advantag=
e=20
of the savings that they perceive to be available in the deregulated=20
wholesale energy market. They also plan to buy out the bond issue obligati=
on=20
from MEAM and finance it through revenue bond issues of their own.
=09
=09At this point the story breaks down into two other issues. One is a ver=
y=20
legitimate difference in style of operation and management between MEAM an=
d=20
the two cities. The other is a rather obvious problem with power, =20
personality and disgruntlement.
=09
=09Neil Davis, General Manager for MEAM, admits to being conservative in h=
is=20
management style. "I=01,m the first to say we=01,re not where we=01,d like =
to be=20
costwise," Davis says, "but we know that we=01,ve controlled and lowered c=
osts=20
over the years. We=01,re very competitive and have the lowest costs in the=
area.
=09
=09"Entergy views MEAM as a good wholesale customer and they do all they c=
an to=20
work with us. We have a good track record with them. We are moving =20
cautiously. We=01,re not going to abandon a good relationship unless we are=
=20
sure it will improve our circumstances. We look at the end of the year, no=
t=20
each transaction," Davis continues.
=09
=09"Entergy provides a load-following service that keeps the load balanced =
and=20
has energy follow demand on an instantaneous basis. Our facilities are not=
=20
equipped to do this. We know Entergy can and will do this and we don=01,t =
have=20
the track record with other suppliers."
=09
=09Bob Priest, General Manager of the Yazoo City Public Service Commission=
, is=20
much more daring in his approach. "You have to take a risk from time to=20
time," he says. "MEAM hasn=01,t changed in the last ten years, and the uti=
lity=20
industry has changed drastically."
=09
=09Public Service and other officials from both Clarksdale and Yazoo City =
are=20
furious about the new contract with ESI. Both cities would prefer not to d=
o=20
business with Entergy at all, an attitude that has little or nothing to do=
=20
with MEAM. Both parties admit that there have been divisive issues for thr=
ee=20
or four years, but the recent contract seems to have been the straw that=
=20
broke the camel=01,s back.
=09
=09Sources who prefer to remain unnamed say that there are other problems. =
=20
Various people are angry at staff for various personal reason. Others see =
a=20
conflict of interest in Public Service professionals being on the Board, =
=20
which was designed as a citizen review entity. They say it puts them in th=
e=20
position of being able to review their own performance. Comments from peop=
le=20
from the unhappy cities, including their attorney=01,s presentation to the=
=20
Board, contain thinly veiled accusations of wrongdoing that border on =20
character assassination.
=09
=09As accusations and recriminations fly, many in the Delta are disappoint=
ed in=20
a situation that is likely to bring harm to all eight cities. If the citie=
s=20
do successfully pull out of MEAM, it will be interesting to see if, as in=
=20
Aesop=01,s fable, the hare or the tortoise wins the race. DBJ
=09