We did a rush and that's why we're in the pickle we're in

City decides to get into the steam selling business. Converts an old power plant to sell steam to four industrial customers. What could go wrong?

• Plant operations were more expensive than the city thought it would be.
• A potential customer employed a modest amount of legal acumen and backed out of the project.
• Three years on a key machine isn't working correctly.
• The cost of coal doubled, requiring a changeover to softer coal.

The city as taken out loans totaling $13.9 million, which has caused their credit rating to plummet. In turn other projects are delayed or put off. Hard to talk the bank into paying for a new fire station when you're trying to pay off the note on a huge ol' coal-fired steam plant.

The plant is worth - at best - $17 million. The total debt is $40 million, which makes it kinda hard to sell without incurring even more debt.

Some choice quotes

"We did a rush and that's why we're in the pickle we're in," said Stan Martenson, longtime president of the Utilities Commission. "We're bleeding red. We've got to change it."

You think? One wonders if Stan might have exercised a tad more diligence if he were using some of his own capital here.

Since PCI (consulting company) already had done a lot of work for Wisconsin Public Power, Martenson said utility officials felt comfortable. Ultimately, he said, utility officials misinterpreted the consultant's proposal to mean a total cost of $12.5 million.

Translation: We didn't read the consultants report beyond the summary page.

In late December 2005, utility officials received a signed steam supply contract from papermaker SCA Tissue, which had been expected to be the plant's second largest steam customer. Their relief soon turned to dismay when it was discovered that SCA, which had signed a letter of intent to negotiate a steam contract in November 2004, had added a provision that would allow it to back out at virtually any time.

Translation: We didn't read the legal stuff we signed, either.

Laux said contracts with three other customers — Sonoco/U.S. Paper, Whiting Paper and Alcan Packaging Inc. — have provisions requiring them to pay hookup costs should they decide to stop buying steam. While the plant reportedly has helped those buyers reduce their costs, utility officials recently asked them to renegotiate their contracts to help keep the plant afloat.

I know what my answer would be - I have no doubt the guys at Sonoco, Whiting and Alcan will be nicer about it.

Evenson, who is an attorney, has read the consultant reports and thinks that the central question is whether existing customers are willing to pay more for steam.

"If they are willing to do so, the plant may be able to survive and it might generate a very modest profit," he said. "If they are not willing to pay more, then the utility and the city need to look at the hard alternatives presented."

Better start looking at the hard alternatives then.

The best part? The guy in charge - Martenson - of all this has been re-apointed to a new five-year term on the commission. Rewarding the success that is just out of reach, I suppose.