Economic Benefit of Cleco's Rodemacher 3 Power Plant

Rodemacher 3 is a great source of pride for Cleco.  It’s one of those rare projects with a mixture of benefits that will improve the economic well-being of Louisiana for many years to come.  The project also demonstrates that Louisiana has the talent, infrastructure and resources to grow its own economy.

Specifically, Rodemacher 3 will help meet our customers’ growing energy needs, stabilize our customers’ fuel costs, assist in addressing environmental issues facing our industry and nation and generate new revenue for our local and state economies.

I’ll start with how Rodemacher 3 will help meet our customers’ growing energy needs.  Most of us use electricity daily, and we do it without even thinking about it.  When you enter a room and turn on the light switch, you expect light.  We use electricity to heat and cool our homes, cook our food and wash and dry our clothes.  If you’re reading this blog, you’re using electricity right now.  As our need for electricity grows, we as a company have to plan ahead and regularly evaluate our power sources to ensure we can meet customer needs now and in the future.  When Rodemacher 3 begins commercial operation, it will have the capacity to produce 600 megawatts of power.  This new native generation will substantially reduce the amount of power we currently purchase from the market.  And with a life span of at least 30 years, Rodemacher 3 will still be generating electricity when the four- and five-years-olds starting school this year become adults and start families of their own. 

Second, Rodemacher 3 will help stabilize customers’ fuel costs by expanding Cleco’s solid-fuel generating capacity and reducing the company’s dependence on natural gas-fired generation.  Today, approximately 70 percent of the electricity Cleco distributes is tied to natural gas.  This includes our own older natural gas-fired units and electricity purchased from the market.  The remaining 30 percent comes from solid fuels.  This 70/30 natural gas/solid fuel mix became problematic when natural gas prices increased significantly, resulting in high fuel costs on customer bills.  For those of you who may not be familiar with our business, fuel is essential to electric production.  We, along with other electricity providers, rely on natural gas, oil, solid fuels such as petroleum coke or petcoke, coal and lignite, nuclear energy, hydropower, and other fuels to generate electricity.

Having been in the business for more than 38 years, I can tell you that no one fuel can meet all of our energy needs.  For Cleco, the goal is not total abandonment of natural gas, but fuel diversification.  Adding more economical fuels to our fuel mix will help insulate our customers from the price fluctuations that exist in today’s natural gas and oil markets.  This is why we chose circulating fluidized-bed (CFB) technology, also called clean coal technology, for our unit.  CFB boilers can process a variety of solid fuels.  The technology also includes state-of-the-art pollution controls, which are good for the environment.   

Petcoke, a byproduct of the oil-refining process produced here in the Gulf Coast region, will be the primary fuel used in Rodemacher 3 to generate the power.  Using a locally produced fuel also makes us more energy independent and stronger as a nation.  Petcoke will be barged along Louisiana’s Mississippi and Red rivers to Rodemacher Power Station from the refineries in south Louisiana.
 
Another long-term benefit is that CFB boilers also can generate electricity from biomass, or renewable energy sources, including wood, wood waste and agricultural crops.  With this additional attribute, Rodemacher 3 can assist in addressing environmental issues facing our industry and nation, which means we’ll be better prepared if and when some type of federal climate change legislation is enacted and/or a renewable energy requirement is passed. 

Rounding out Rodemacher 3’s benefits is the substantial income it will generate in Rapides Parish and the state through permanent jobs, ongoing operations and taxes.  When we announced the project in July 2005 during a press conference at the Baton Rouge Capitol, numerous state and local leaders stood with us because they knew our plan to build a $1 billion electric generating unit was a significant investment in Louisiana. 

During construction, which officially began in May 2006 and is now more than 90 percent complete, we estimated we would spend $482,000,000 on materials, equipment, fuel and labor in Louisiana.  At the state level, our construction costs will increase business activity by approximately $1 billion and increase new state treasury revenues by approximately $18 million.  Locally, the millions spent during construction will increase business activity by approximately $760 million and increase sales tax by approximately $12 million.  We also had more than 2,100 workers on site at the height of construction, about 900 more workers than the initial estimate of up to 1,200 workers. 

Rodemacher 3 is scheduled to begin commercial operation in the fourth quarter of 2009.  During ongoing commercial operation, we estimate we will spend approximately $43 million on materials, labor, fuel and maintenance each year to operate the unit.  At the state level, ongoing operations will increase business activity by approximately $77 million annually, create 405 new jobs through employee spending and unit purchases of materials and supplies, and increase new state revenues by $1 million annually.  Locally, ongoing operations are expected to increase property tax revenue by $157 million over a 30-year period and increase sales tax revenue by $240,000 annually.  The project also has created 80 permanent, good-paying jobs in Louisiana. 

The Rodemacher 3 project is truly a Louisiana success story.  We’re a Louisiana company.  We provide electric service to 23 of Louisiana’s parishes.  We’re investing in our state by using a byproduct of Louisiana for fuel and Louisiana’s waterways to transport the fuel.  We hired a Louisiana company to build Rodemacher 3.  And before the end of the year, Louisiana will be the home of one of the largest CFB units in the United States.  Most importantly, we realize that this $1 billion project would have gone nowhere without the support of our state and local public officials, customers, neighbors and friends.

Michael Madison
CEO of Cleco Corp.
Aug. 28, 2009