2016-06-24 / Front Page

Dam divide breeched

KLP trustees vote to surrender federal operating license for Mousam River dams
By Wm. Duke Harrington Staff Writer

KENNEBUNK — A decision years in the making finally fell last week, as the Kennebunk Light and Power District (KLP) agreed to not renew a federal operating license for three dams it owns on the Mousam River.

That vote, however, does not automatically mean the dams will be torn down to allow free flow of the river through town.

KLP General Manager Todd Shea said the June 15 vote was only to notify the Federal Energy Regulatory Commission at some point before March 2017 that the power district will not seek license renewal.

However, an official filing of that decision is pending his investigation into what FERC might require as a result, up to and including removal of the dams. So, trustees could still change their mind if they don’t like what Shea finds out.

“We own the dams, we keep the dams,” KLP Vice President Wayne Berry said. “We’ll give up the license for generating electricity. Then we’ll see how big a stick FERC comes back with, and what they want us to do.”

KLP board member David “Duffy” Cluff noted, “There’s nothing in the [FERC] guidelines that say if we decide to stop generation and we notify them of that, that they come back to us and say we have to remove the dams. We don’t know that. But we would find that out through the process.”

With a March 2017 deadline looming to notify the FERC of its intent, the dam question has captivated much attention in Kennebunk since at least July 2013, when KLP held its first informational hearing on the topic.

The district’s FERC license does not actually expire until 2022, but the five-year relicensing process is as potentially expensive as it is time consuming, pegged at $1.3 million for clearing the administrative hurdles alone.

Last fall, Portland engineering firm Wright-Pierce issued a 90-page report on the dams, updated this past March, and again in May, predicting it could cost as much as $11.68 million to relicense the dams.

Much of that money would be spent on a likely federal requirement to install fish ladders at all three sites. Adding interest and inflation over the life of bonds needed to fund the project could push that cost as high as $16.9 million, Wright-Pierce said.

“As a small 6,500-meter utility in the state of Maine, we’re trying to undertake the same process the Hoover Dam would have to go through,” Shea said at last week’s meeting of district trustees.

The KLP board has known that much for some time, and they’ve held their tongues on any possible decision while collecting data on the various paths they might take. What seemed to fi- nally tip the scales in favor of walking away from the dams KLP was founded on, however, was a report received just last week on the condition of the power making equipment.

“It was a real eye-opener for us,” Berry said. “Most of the generating equipment we have has either reached the end of its useful life, or, in some cases, is past the end of its useful life.”

According to Shea, the generating unit at the Kesslen Dam, inside the adjacent Lafayette Center on Route 1, dates to 1928, while the dam itself was last reconstructed in 1951. The Lafayette Center was built as a shoe factory, using the dam to power its machinery, and it was here in 1893 where KLP got its start when the town agreed to help the struggling mill by buying excess power from the dam to install the then-new technology of electric street lamps in town. First a municipal department, KLP became an independent entity in 1951, the same year the Kesslen dam was converted from wood to concrete. Farther up river, the Twine Mill generating unit and its dam date to 1980, while the generating unit at the Dane Perkins location was built in 1936. Its dam was last rebuilt in 1980.

On June 10, the KLP board of trustees received a third-party verification of the Wright-Pierce report, at a cost of $6,300. That review, prepared by GZA GeoEnvironmental Inc. of Norwood, Massachusetts, essentially backed up the Wright-Pierce financial analysis of how much it might cost KLP to relicense the dams, or to pursue other options, including surrendering the licenses and tearing out one or more of the Mousam obstructions. But what really got trustees’ attention was a separate report, delivered April 28 at a cost of $2,300. That assessment, written by William Clewes of Gorham, New Hampshire-based Lee Carroll Engineers, was damning for the dams.

Dam condition

Clewes noted that the switchboard at the Dane Perkins dams is “beyond any safe and reliable service” with the generator breaker “in extremely poor condition.” Shea said replacing that board would cost roughly $100,000.

And while the Twine Mill generator is the newest of the three dams, its juice flows out on transformers that Shea said “are 1950s vintage.”

But the real issues, comparatively, are at Kesslen.

“The report was pretty alarming,” Shea said. “And then, going down with AC Electric and seeing the carbon build up in those [generator] windings – they did not express concern, but I could tell they were a little uneasy about what’s operating down there.”

“The windings of this generator are nearing failure,” Clewes wrote, noting that Auburn-based AC Electric had condemned the unit in 2012.

“Four years ago when I visited the site I was very surprised we were able to get the machine to generate again,” Clewes wrote. “My parting comment to KLP [then] was ‘Take what you get for life extension. It is a gift.’ The windings are very dirty and do contain a lot of oil and carbon dust. This machine will fail in the foreseeable future and a complete rewind will be required.

“The condition of the windings and the location of the machine present a significant fire risk to KLP,” Clewes wrote, noting the smoke alarm for the generator room had been removed at some point.

“If this machine were to fail and if the oil-saturated winding were to start to burn, they may continue burning and spread to the building,” he said.

Meanwhile, Clewes noted that KLP has apparently failed to keep up with routine maintenance on the unit. The turbine’s guide bearing blocks, which should be adjusted monthly, he said, have apparently not been touched in more than five years.

Those blocks keep the runners – the part of the generator the water acts on to spin the turbine – centered in their casings. According to Shea, all of the gauges on the unit by the runners “are stuck in place.”

“Based on the response [to testing] I can predict the runner has been well worn and that a lot of water is leaking by,” Clewes wrote. “A safe estimation is that approximately 10 percent of the possible power producing capability is being lost.”

Still, Clewes wrote, the lack of routine maintenance is nothing new at KLP, nor is the idea that the dams might one day go away.

“I have had an association with KLP for approximately 25 years, primarily dealing with the electrical side of the hydro generation,” he said. “I have always been told, ‘We cannot spend any money as we may not keep the sites operational.’ KLP is now at the point that some money will be absolutely necessary if these sites are to continue operating.” At the June 15 meeting, Shea told the five KLP trustees it would cost “between $200,000 and $500,000 to rehabilitate just the Kesslen power generator.

And the cheapest way to do that, he said, is to remove the turbine and take it to an off-site repair facility. However, the only way to get the generator out of the Lafayette Center is to lift it up out of the floor of Duffy’s Tavern, which would shut down that business for an indefinite period.

Duffy’s owner, David “Duffy” Cluff, sits on the KLP board, and so recused himself from all votes regarding the dams.

“Even if Duffy was not a trustee, I don’t think the board would want to pay for the cost of lost business to whatever was there,” Shea said, predicting that a fix for the Kesslen turbine, which he said “has always been our problem child,” would be “something that is prohibitively expensive if not impossible for us to repair.”

“At this point in time, that [25 years of] deferred maintenance is going to cost exponentially more, because at that time the district did not feel it had the wherewithal or the necessity to make those repairs,” Shea said.

“But in hindsight, we haven’t had a fire and we’ve had cheap power from the dams,” replied KLP President Jonathan “Jay” Kilbourn. “So, so far it’s been right, but the question is where does this board want to go next.”

But before the board could turn to that decision, Shea had an interjection.

“That depends on your definition of cheap power,” he said.

Dam losses

Critics of the Mousam dams have long claimed they are inefficient and supply little of the power distributed by KLP to its customers. The district has for many years acknowledged this to be true, allowing that only about 1.5 percent of the total power flowing through its lines is made at the dams. The rest is purchased off the grid.

However, at the June 15 trustee meeting, Shea unveiled new numbers.

In 2015, KLP’s three hydro facilities generated 957,720 kilowatt hours (kWh) of electricity, he said. Per site breakdown came to 233,400 kWh at the Kesslen Dam, 462,00 kWh from Twine Mill, and 262,320 kWh from Dane Perkins. That, Shea said, amounted to just 0.86 percent of the electricity KLP sold that year. So far in 2016, Shea said, the results are a little better, with 488,700 kWh of electricity made through May, for 1.1 percent of all KLP power.

Even more damning, as it were, is that KLP is making that electricity at a net loss. According to Shea, the district spent $109,862 to run the three Mousam dams in 2015. That includes labor costs and supplies, liability insurance, interest on a 1983 bond and equipment depreciation, among other costs. However, for the 99.14 percent of its electricity KLP bought off the grid in 2015, it paid $0.07898 cents per kWh. At that rate, even when factoring in regional network service fees of $0.0212 per kWh and transmission fees of $0.003 per kWh, it would have cost the district $98,817 to buy the 957,720 kWh of electricity made at the three Mousam dams – a net operating loss of $11,045 over what it actually spent producing that power.

In other words, KLP is making power at 11.4 cents per kWh, when it could make that same electricity at 10.3 cents.

And that loss, Shea said, does not count $138,000 spent by KLP during 2015 on relicensing studies, safety inspections and other dam reports. Shea noted that “if our auditors would let us,” include the cost of those reports in the charge for electricity to customers, KLP would be charging “25 cents per kilowatt hour.”

“We finally, for the first time in the three years I’ve been on this board, actually have a cost for operating these facilities and the power produced, and that’s a third more than we’ve been told for the longest time,” Kilbourn said. “While it’s upsetting, we appreciate getting the numbers. Since it’s more than we’re paying for power, I’m almost wondering why are we talking about making any improvements at this point, unless there’s a bigger plan.”

Apparently there wasn’t, and news of the ongoing operating loss, coupled with the report on the condition of the Kesslen generating unit, prompted Berry to move that KLP immediately suspend use of the site. That motion passed 4-0, with Cluff not voting, although he seemed in favor of the idea.

“The alarm is not connected to shut generator down [in case of fire],” he said. “We don’t have the right systems in place. It’s putting real estate at risk, it’s putting people at risk, and it’s putting the district as a whole at risk.”

“It’s something that we need to rectify before we continue generating [power] at that site,” Shea agreed.

“I would say our mission is clear – affordable, reliable and safe – and not in that order, but safe first,” Kilbourn said.

On Monday, June 20, Shea said via email it has since been confirmed the sprinkler system inside the Lafayette Center’s generator room is charged and operational. A meeting would be held during the week with Kennebunk’s fire chief to ensure the alarm system is hooked back up and smoke detectors installed, he said.

Dam future

With the Kesslen shut down, the question of what to do about the FERC license seemed almost a foregone conclusion, especially given a recommendation made by Shea, delivered beforehand to trustees and read verbatim at the June 15 meeting.

“As General Manager of Kennebunk Light and Power, knowing what I have learned, seeing what I have seen, I cannot make a recommendation to the board that it is in the best financial interest to seek to continue generating electricity with our current equipment beyond the current license,” he said. “It would be irresponsible of me to make a recommendation to gamble on aged and aging equipment. It just wouldn’t make sense.

“None of the reports that KLP has been provided with take into consideration replacement costs of the dams when they are in need of replacement or serious rehabbing,” Shea said. “None of the reports take into consideration replacement costs of generating units. All of the reports assume continued generation by the current units [for the 40-year duration of any new FERC license]. All of the reports assume continuation of the use of the dam structures. I would be shirking my duties to the board and ratepayers to make a recommendation to continue generating with our current equipment past our current license term. It does not make economic sense.”

The board agreed, voting 4-0, with Cluff recusing himself, to notify FERC that KLP will not seek to renew its current license to generate power past 2022. The board also agreed not to commission any additional reports on the dams.

“This thing’s becoming a money pit,” Trustee Mike Jordan said. “I don’t think we should spend a dime apart from the safety issues.”

“I say we don’t spend any money because we don’t know where it’s going to take us, except the fact we’re going to know a little bit more about how much more we have to spend,” Berry said,

“Not to sound too much like a pessimist, but it would only tell us how bad off we actually are,” Shea agreed.

Of about 65 people in the audience at the June 15 meeting, most applauded the decision to surrender KLP’s federal license. One person not clapping, however, was Daniel Bartilucci, who, the day before the session beat Mike Jordan at the polls for a seat on the KLP board of trustees. He had campaigned on a “Save the Mousam” platform to keep the dams in place.

“Obviously, I’m not pleased about it,” he said on Monday, declining further comment until sworn in.

Still, surrendering the FERC license does not automatically mean the dams will come down.

Ratepayers

A number of ratepayers in the audience June 15 urged Shea to try and lure his FERC contact to Kennebunk, given than any pre-filing meetings are likely to take place in Washington, D.C.

“What’s it going to take to get FERC here, because we’re the kind of folks who are going to jump on the bus and follow you down to D.C.,” Patricia Hughes said.

However, a local tete-a-tete does not appear to be in the cards. On Monday Shea said via email, “I have spoken to FERC. They are getting together the information that we need moving forward, and will set up a meeting in D.C. should KLP decide to meet with them ahead of a filing.”

Under audience questioning at the June 15 meeting, Shea also said another entity, including the town of Kennebunk, could apply to FERC for a license, pending any agreement by KLP trustees to sell the dams and generator equipment. Once KLP files to surrender its license, the dams “are fair game,” to anyone else, he said. While Kennebunk selectmen have expressed more fear of getting stuck with the dams than interest in obtaining them, many residents, particularly those who live along the Mousam, have lobbied for maintaining current water levels by keeping the dams in place. Whether the dams can stay if power generation ceases is unknown, but at least one KLP trustee thinks they have value of their own that could add to district coffers.

“The dams are where the money is,” Berry said. “Right now the generating equipment is a penny a pound for scrap, if you can even get it out.”

During a 50-minute closed-door meeting immediately prior to the June 15 decision, KLP trustees apparently discussed a possible sale option. Once trustees returned to open session, they voted “to continue negotiations with Surge Hydro.”

Founded in 2013 with the purchase of the Goose River Hydro station in Belfast, Surge Hydro touts itself as an innovator in bringing old dams back on line for power generation over small, independent grids.

What that means for KLP, exactly, is unknown.

Shea has refused to answer questions from The Post except in writing. Trustees apparently took umbrage when he let slip in an interview last fall, in an anecdote about the detail contained in the Wright- Pierce report, that one board member had confessed to difficulty staying awake while trying to read it. Shea’s full written reply to a question about the nature of Surge’s interest in KLP was, “Negotiating their potential interest in the sites.”

There also remains the possibility of state intervention. Gov. Paul LePage has long touted energy prices as a drag on Maine’s economy, and is known to be a fan of hydropower. As such, he dispatched Lisa Smith, the senior planner in his energy office, to the June 15 meeting.

Smith told trustees she would be reporting to the governor on that session. On Monday, she said that report “is on my boss’s doorstep” in preparation for delivery to the governor. What reaction LePage will have to that KLP vote, if any, should be known “in a couple of weeks,” Smith said.

Staff Writer Duke Harrington can be reached at news@kennebunkpost.com.

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