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Feds deny stimulus for Taum Sauk reservoir

Energy regulators have rejected Ameren Missouri’s bid to get federal stimulus funds for rebuilding the upper reservoir of its Taum Sauk hydroelectric power plant – the giant mountaintop pool that ruptured in 2005

Such grants are more commonly awarded to developers of wind farms and solar projects. But St. Louis-based Ameren asked the Federal Energy Regulatory Commission last month to certify the increased capacity at the Reynolds County pumped storage plant as a green-jobs project, making it eligible for stimulus funds. The grants are awarded under a provision of the 2009 American Recovery and Reinvestment Act meant to generate jobs and subsidize clean energy projects.

Ameren officials submitted an engineering report to FERC last month stating that the new upper reservoir, completed in 2010, could generate more energy than the one it replaced because it leaked less, and therefore qualified for payments. The utility also said the rebuilt reservoir could be operated at a higher capacity during winter, further adding production capacity.

But FERC – the same agency that investigated the reservoir collapse – disagreed.

“We have determined that the rebuild of the upper reservoir embankment, which enabled you to reduce leakage from the dam and to restore the upper reservoir elevation to the authorized water limit, are not considered efficiency improvements,” Edward A. Abrams, director of the agency’s division of hydropower administration and compliance, said in the June 29 letter.

Ameren Missouri spokeswoman Rita Holmes-Bobo said utility officials are “studying FERC’s order and have made no decisions as to what, if any, further actions we will take.”

It is unclear how much Ameren hoped to receive in stimulus funds. Treasury Department program rules say owners of qualifying hydroelectric projects may seek cash grants equal to 30 percent of the “eligible cost basis” In a response to questions before FERC’s decision, the utility said it hadn’t yet determined that figure.

Efforts to secure taxpayer funding for Taum Sauk represent the utility’s latest unsuccessful effort to recoup some of the costs of the new reservoir.

The utility, which agreed in a 2007 settlement with Attorney General Jay Nixon not to charge electric customers for the cost of rebuilding, did try to sway the Public Service Commission for approval to bill consumers millions of dollars for some “enhancements” at the plant, including safety features. But the PSC disallowed those costs.

Ameren also sued two of its insurers for failing to pay claims related to the reservoir disaster. One of the lawsuits was dismissed; another is still pending in U.S. Circuit Court in New York.

The upper reservoir disaster occured on the morning of Dec. 14, 2005, when a 700-foot section of the rockfill dam collapsed. More than 1 billion gallons of water was released in a matter of minutes, scouring the mountainside of trees and boulders. Johnsons Shut-Ins State Park was badly damaged.

The rebuilt upper reservoir was completed in early 2010 at a cost of $490 million. And Johnson’s Shut-Ins has been restored.

The 409-megawatt Taum Sauk plant on the East Fork of the Black River, about 100 miles southwest of St. Louis, is unlike most other hydroelectric plants. It generates energy using two reservoirs – one atop Proffitt Mountain and another hundreds of feet below. Water is pumped up the mountain at night when electricity is cheap , then released during times of peak electricity demand when electricity prices go up.

Ameren makes a profit on the difference in electricity prices even though the plant uses more energy than it generates.

Although so-called pumped storage projects are seen as valuable for their ability to store energy, the fact that Taum Sauk also consumes large amounts of energy made it ineligible under the state’s renewable energy law.

PJ Wilson, director of Renew Missouri, which has battled with Ameren over renewable energy policy in the state, found it ironic that the utility was seeking to take advantage of the green energy provision in the stimulus bill.

“While inexplicably doing everything they can to avoid building renewables in Missouri, today it appears they were asking for the federal government to use renewable energy tax incentives to instead incentivize Taum Sauk,” he said.

As of June 8, the federal government has paid out more than $200 million in stimulus funds for energy projects in Missouri. The vast majority of that – about $193 million – has gone to two projects – Iberdola Renewables LLC’s Farmers City wind project and Wind Capital Group’s Lost Creek wind farm. Hydropower projects nationwide had received just $23.5 million.

The stimulus bill signed by President Obama in February 2009 didn’t specifically create subsidies for added capacity at hydroelectric projects. But it let developers seek cash grants in lieu of tax credits for expansions, which were originally authorized under the 2005 energy bill.

Hydropower projects that add production capacity or boost efficiency between 2005 and 2014 are eligible for payments if owners add generating capacity. The increases must be certified by FERC.

In documents filed with the agency, Ameren says the Taum Sauk upper reservoir only leaks at a rate of about 2 cubic feet per second compared with 25 cubic feet per second atthe old reservoir. As a result of that and higher operating levels during winter, the plant can generate an additional 12,000 megawatt-hours, an increase of about 1.9 percent a year.

But FERC said the increased reservoir capacity doesn’t qualify for federal incentives. It attributed the gains to “actions taken to properly maintain and operate the project as licensed.”