VIDALIA, La. – In the late 1970s, then-Mayor Sidney Murray Jr. first began to envision a power plant that would make electricity from the Mississippi River and help stabilize electric rates even as the cost of power on the open market climbed.

Ten years after the Sidney A. Murray Jr. Hydroelectric Station went online 40 miles south of Vidalia, electric rates for Vidalia customers recently increased more than $1.60 per month, and customers want to know why.

But the path to the answer leads through a maze of figures – three electric contracts, several years of town budgets, electric prices and power production figures, to a name a few.

&uot;It can get confusing,&uot; Murray admitted, sitting in a visitor’s center not far from the plant. &uot;But (the hydro plant is) a good project, and it’s doing what it’s supposed to do.&uot;

Three power contracts

The first step of the equation is understanding the town of Vidalia’s role in the purchase and resale of electricity generated by the plant.

Under its contract with the private partnership that runs the plant – a partnership of Catalyst Vidalia Corp. and Dominion Capital of Richmond, Va. – the Town of Vidalia must buy 6 percent of the power produced by the plant. (The plant sells the rest of its power to Entergy.)

With last month’s low river levels, the plant produced only 20 gigawatts (a gigawatt is a billion watts) and the Town of Vidalia bought 6 percent, or 1.2 gigawatts. At a purchase price of 12 cents per kilowatt hour, the Town of Vidalia spent $144,000 on that 1.2 gigawatts.

Through a separate contract with the Louisiana Electric Power Association, the town in turn sells that 6 percent — or in the case of November, 1.2 gigawatts — to LEPA at a rate of 3.6 cents per kilowatt-hour.&160;In November, the town earned $43,200 from the sale of that 1.2 gigawatts.

Vidalia, in turn, has a contract with LEPA to buy enough power from LEPA to meet the town’s electricity needs. Vidalia uses a peak amount of 15 megawatts in the hottest months, according to Guy Thompson, Vidalia’s utilities supervisor.

The price the town pays for electricity from LEPA is dictated by the open market. This month, the town pays 5.5 cents per kilowatt-hour for electricity. Last month, it paid 6 cents. &uot;That is all dictated by the market,&uot;&160;said Kenneth Davis, Vidalia town manager.

The buy-sell-buy again deal meant the town paid a net 14.4 cents per kilowatt-hour for electricity in November. And, unless that cost can be offset by prices charged to Vidalia customers or by royalties from the hydro plant, which were specified in the original agreement, the town would face a loss in the energy deal.

In November, the town approved a 1.68-cent increase in base utility rates — the first since 1987 — setting the new base charge for residential customers at 15.6 cents per kilowatt-hour. However, the royalties from the hydro plant did not get paid.

Hydro plant royalties

The Town of Vidalia is currently supposed to receive royalties from the plant equal to 6 percent of the plant’s gross revenues from the sale of its power.

(Under the hydro contract, the amount of royalties to the town escalates from 3.75 percent when the plant opened in 1990 to 20 percent in 2022.)

The town has received $30,109,243 in plant royalties since May 1990. In addition, the town has earned $12,370,374 from power sales to LEPA and $573,624 in interest on revenues and royalties.

Of those revenues, $38,293,481 was spent on purchasing power from LEPA. The second-highest amount — $3,063,246 — has gone to the town’s utility fund to cover excess power costs.

Such transfers are made whenever the price the town pays for power goes above 3.8 cents per kilowatt-hour — in fact, subsidizing the extra cost of power so that cost does not have to be passed on to customers.

&uot;The (hydro project)&160;was set up to help stabilize power rates, and it’s doing that,&uot;&160;Davis said, referring to the arrangement which utilizes the royalties to offset the town’s costs, sparing the passing on of the those costs to customers.

No royalties — for now

Almost three years ago, the town had also saved $2.4 million in hydro royalties in a reserve fund.

Since then, that money has been spent to help cover the excess cost of the electricity the town buys. Usually, hydro royalties coming to the town every three months replenish that fund.

But in late fall 1999, the town first became aware that the Mississippi River was getting too low to generate much power, if any.

With the plant unable to generate much power — and in turn, sell that power — the plants profits declined and its ability to pay those royalties was hampered.

Still, Vidalia officials were reluctant to make substantial cuts in the town’s budget. &uot;It’s hard to lay someone off when you don’t know if the river might go back up in a month or two,&uot; said Vidalia Mayor Hyram Copeland.

Under the contract between the hydro partnership and the town, the partnership can defer royalties to the town indefinitely.

Those royalties must be paid to the town, but not until the river gets high enough — again, 40 feet or more — for the plant to once again make a profit. Since the plant is operated by a private partnership, the plant’s own financial figures are not public record.

So starting with the first quarter of 2000, the partnership began deferring those royalties. It now owes the town about $2.4 million in royalties and interest.

The river is currently at about 28 feet above sea level — compared to the 40 feet or more it needs to be for the plant to run at full capacity.

Last week, for instance, only three of the plant’s eight water-turned turbines were in operation, and the plant was producing less than 31 megawatts of electricity at one time.

And, since no one can predict when the river will rise, it is not known when the town might receive the deferred royalties.

Without royalties to help stabilize utility rates, the excess cost of power was passed on the customer in the form of higher rates for electricity. As a result, starting in November, minimum electric rates for residential customers went up $1.68 per month, while the rate for businesses went up at least $1.76 a month.

How deferred royalties will be spent

Once the town gets those royalties, its first task will be replenish the reserve fund, Davis said.

The town’s goal is to eventually build up $3.5 million or more in the reserve fund, enough to cover the town’s excess power costs for two years in the event that very low water levels happen again.

That is important because U.S. Army Corps of Engineers figures show low water levels will naturally happen, although it is difficult to predict when they will happen or how long they will last, Murray said.

Up to 50 percent of the money left after such transfers to the reserve fund can go to the general fund. Remaining funds can be spent for any legal purpose provided a public hearing is held for public input on how such money should be spent, Davis said.

Copeland has refused to comment on whether some of the remaining royalties would be used to give rebates to customers.

Meanwhile, the town has cut its budget by 10 percent and has put a hiring freeze in place to help control costs, Copeland said.

Vidalia’s general fund

The town already has reaped benefits from the plant. During the last decade, hydro revenues — along with sales tax revenues — have been transferred to the general fund to help cover deficits. The town has spent $1.34 million to $2.11 million more from the general fund than it has taken into the fund.

To make matters worse, the state recently eliminated tobacco tax revenues that went into the general fund. As a result, general fund revenues dropped from $982,260 in 1999 to $712,664 this year.

The general fund pays for virtually all of the services the town provides — such as streets, sanitation, police and fire — and for building and equipment upgrades and personnel salaries and benefits.

Although many of those transfers to the general fund have been paid back to the hydro royalty account over the years, the account has still lent a net amount of $815,830 to the general fund to cover deficits.

‘The Hydro’: A long-term boon

But Copeland, like Murray, also expressed hope that the plant will be a more long-term boon to the area. For example, it is scheduled to go on the parish’s tax rolls at the end of this year.

That means entities such as the parish Police Jury and School Board — although not Vidalia, since the plant is located outside the town — will get millions of dollars in taxes from the plant beginning in December 2001.

Reliable estimates of those amounts will not be available until September.

&uot;People have to understand that this is a long-term project,&uot; Copeland said. While the town may be going through tough times now, he said, &uot;the long-term benefits to this whole area will be great.&uot;