Springfield City Council approves lower Arch coal price

The Springfield City Council on Tuesday approved a contract with Arch Coal and held off on extending a redevelopment agreement with the Salvation Army for tax increment financing funds.

Aldermen voted 7-3 for a contract to purchase coal for a lower price, $35.90 per ton through 2020. City Water, Light and Power buys a substantial amount of the coal produced at the Viper Mine near Elkhart, which Arch owns.

"There's less risk now, we avoid the capital cost to switch," CWLP chief utilities engineer Doug Brown said, adding that the move ensures there will be competing coal mines in the area in the future.

The city has been paying as much as $45 per ton for coal, and the new price amounts to $57.9 million in savings for the CWLP. The savings in this fiscal year's budget will be lower – the budgeted coal price included in the spending plan was $39 per ton.

The approved contract with Arch also calls for the company to remove up to 60,000 tons of ash annually from the Dallman Power Plant for $5 per ton, a decrease from what the city has been paying.

Some aldermen emphasized they want to see those savings used to provide some relief on bills for rate-payers.

The council Tuesday heard again from Foresight Energy, which submitted a competing bid for CWLP's business, right up until taking a vote on the contract.

Foresight has argued that going with it would save the utility more than $30 million over five years. A company representative said a presentation two weeks ago by CWLP officials "artificially inflated" Foresight's bid and overstated the capital cost for switching.

"We might be able to save more, but you have that risk," Ward 10 Ald. Ralph Hanauer said of switching companies.

Ward 3 Ald. Doris Turner, Ward 4 Ald. John Fulgenzi and Ward 6 Ald. Cory Jobe cast the three "no" votes. Turner said Tuesday she was in a "quandary" about what to do, with lingering unknowns and inconsistency in the numbers presented to aldermen on the savings the utility will see. Turner voiced concern about Arch’s financial situation, including its bankruptcy filing and company layoffs elsewhere, trickling down to affect the local mine.

John Ziegler, chief commercial officer for Arch, said the Viper Mine is a “cash flow positive” operation.

Ward 7 Ald. Joe McMenamin, who voted for the Arch contract, commended Foresight’s work, and said it’s in the city’s long-term interest to have two competing mines open in five years, when it will again be negotiating a coal contract.

Potential loss of the CWLP contract raised fears that the Viper Mine might have to close.

— Contact Jamie Munks: jamie.munks@sj-r.com, 788-1528, twitter.com/JamieMunksSJR.

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