CHICAGO -- An Ohio electric utility has asked a state agency to pass a resolution that could lead to the issuance of up to $835 million of tax-exempt and taxable revenue bonds to finance an air pollution scrubber at one of its plants.
Michael Mahoney, a spokesman for American Electric Power, said the investor-owned utility has not decided whether to install a scrubber at its Gavin plant or switch to low-sulphur out-of-state coal. To keep its option for financing a scrubber open, he said, the utility petitioned the Ohio Air Quality Development Authority last month to give preliminary approval to a plan to issue the bonds.
Mr. Mahoney pointed out that 25%, or about $200 million, of the $835 million of bonds could be tax-exempt. While the 1986 Tax Reform Act ended the use of tax exempt bonds for air pollution control equipment, tax-exempt financing is still allowed for the solid waste component of scrubbers.
A vote on a so-called inducement resolution for the plan has been scheduled for Dec. 10. Mark Shanahan, executive director of the authority, said he expected the seven-member board to pass the resolution.
Mr. Shanahan explained that the resolution was an agreement to issue the bonds if American Electric Power chooses the scrubber option and if the company's plans for the scrubber "haven't changed substantially" by that time.
If the utility chooses the scrubber option, the resolution also would enable the company to use bond proceeds to pay for some of the $50 million in scrubber preparation costs the company expects to incur by the end of March, according to Mr. Mahoney.
He said the utility does not have a timetable for making a decision on the scrubber option. But Mr. Shanahan said how many pollution emission allowances the utility will be able to get under the U.S. Environmental Protection Agency's bonus allowance program this spring may be a key factor in the company's decision. Under the acid rain provisions of the Clean Air Act Amendments of 1990, power plants will be allowed to obtain allowances to pollute, with each allowance permitting a plant to emit one ton of sulphur dioxide a year.
If the scrubber option is chosen in the spring, Mr. Shanahan said, the bonds may be issued in the second half of 1992. He added that the utility would be solely responsible for principal and interest payments on the industrial revenue bonds and that the tax-exempt portion of the bond issue would fall under Ohio's private-activity cap. The state's cap for the current year is about $550 million, he added.
In July, Gov. George Voinovich signed into law a bill that offered incentives to power plants that use coal mined in the state and formalized the process of issuing bonds to finance scrubbers through the Air Quality Development Authority.