CU board approves lease-purchase arrangement for $280M power supply initiative

Last edited 1:07 p.m., Feb. 4, 2025 [Editor's note: A City Utilities statement previously indicated existing funds would cover half of of the lease payments. The statement has been corrected to indicate that existing funds would be used to cover half of the first year's lease payments.]

The Board of Public Utilities, which governs City Utilities of Springfield, has approved a lease-purchase financing arrangement as the municipal utility provider prepares for $280 million in power supply investments.

The board approved the financing structure at its regular meeting yesterday, according to a news release. Existing funds and future rate adjustments are expected to be used to make payments.

“We’ve carefully evaluated options to minimize the impact on customers,” CU President and CEO Dwayne Fulk said in the release. "By spreading any potential adjustments over multiple years and using existing funds to cover half of the first year's lease payments, we are minimizing the impact on customers."

CU spokesperson Joel Alexander said half of the first year's lease payments is projected at $11 million.

The CU board in September approved the $280 million in power supply projects that comprise three 50-megawatt gas turbines to be installed at the CU-owned McCartney Generating Station, near Strafford, and 36 MW of battery storage within the CU system. Springfield Business Journal previously reported the cost breakdown at roughly $210 million for the gas turbine project and $75 million for the battery project.

CU officials have cited required increases, as dictated by the Southwest Power Pool, in its planning reserve margin brought about by increasing electric demand, aging power generation units and extreme weather events. CU will be required to maintain a PRM of 36% during winter months, up from 15%.

Rate adjustments to support payments through the lease-purchase financing initiative would have to be separately approved at a later date by the CU board and Springfield City Council, according to the release. CU officials say any rate increases would be phased in over two years, with an estimated 3% hike in the first year, though no increases would be made until the projects are in service. The first adjustment is expected in 2027.