Written by As of early 2026, the City of Galion remains locked into a 50-year commitment to the Prairie State Energy Campus (PSEC). While the plant’s performance has stabilized in recent years, the financial burden continues to shape local utility rates. Galion residents are essentially paying a long-term mortgage on a power plant that cost significantly more than expected, providing a steady power source but at a price that has historically exceeded market averages.
Recent adjustments to the city’s Power Cost Adjustment (PCA) highlight a strategy of “gradual increases” to shield residents from sudden price spikes expected throughout 2025 and 2026 due to soaring regional capacity costs.
Document Overview: 2017 Cost of Service and Rate Design Update
This 2017 Sawvel and Associates report outlines a strategy to stabilize Galion’s Electric Operating Fund. It identified that rising expenses required an 8.6% revenue hike to maintain a minimum fund balance of $2.6 million while covering ongoing power supply obligations through AMP.
What is the Prairie State Contract?
The contract is a take-or-pay agreement. This means Galion is legally obligated to pay its share of the power plant’s costs—including construction debt, maintenance, and operations—regardless of whether the plant is actually producing electricity or if the city even needs the power.
- Duration: 50 years (Running through approximately 2057–2062).
- The Stake: Galion is one of 217 communities across eight states that bought into the project. Historically, a massive portion of Galion’s power—as much as 71%—has been sourced from this single plant.
Recent Developments: The PCA “Smooth Transition”
In late 2025 and early 2026, Galion officials and their consultants implemented a strategy to proactively raise the Power Cost Adjustment (PCA).
- The 812% Capacity Hike: Regional “capacity prices” (the cost to ensure power is available during peak demand) surged from roughly $0.90 to over $8.00 per kW-month for the 2025/2026 delivery year.
- Proactive Rate Hikes: To avoid a massive, single-month bill shock, the city began gradually increasing the PCA in early 2025 (raising it from $0.01250 to $0.01450/kWh). This strategy aims to spread the impact over 12 to 18 months rather than hitting residents with the full cost at once.
- Comparison: Even with these hikes, Galion’s average residential rate has recently hovered around 12.8 cents per kWh, which remains lower than the national average but is subject to change as the “levelization” of debt continues.
The Debt Repayment Schedule
The original debt for Prairie State was issued through multiple bond series (2008, 2009, and 2010), with several rounds of refinancing (2015, 2017, 2019, and 2021) to manage high interest rates.
- Current Status: The project still carries billions in outstanding debt. For most participant cities, significant principal and interest payments are scheduled to continue annually through 2041–2043.
- The Final Stretch: While many of the original bonds “mature” in the early 2040s, the full obligation of the 50-year contract (including operations and maintenance) extends into the late 2050s and early 2060s.
- Refunding Strategy: AMP recently issued a “Series 2021A” refunding bond which restructured some debt to pay out as late as February 15, 2030, for certain callable portions. This means that while some smaller debt milestones may be hit sooner, the “lion’s share” of the capital debt remains on the books for at least another 15 to 20 years.
The Original Promise vs. Reality
When American Municipal Power (AMP) presented the deal in 2007, it was sold as a “mine-mouth” project. Because the plant was built on top of a coal mine, officials believed they would save millions on transportation, leading to “too cheap to meter” electricity.
The Reality:
- Construction Overruns: The plant’s budget ballooned from $2.9 billion to nearly $5 billion. Galion is responsible for its share of this $2 billion debt increase.
- Above-Market Rates: For much of the last decade, Prairie State electricity cost nearly double the wholesale market rate.
- Reliability Issues: Early technical failures forced the city to pay for the plant’s debt while simultaneously buying expensive replacement power from the open market.
Financial Strategies: Levelization and Debt
The city and AMP use “Rate Levelization” to manage the high costs. This is essentially borrowing more money to pay the current interest on the original debt, keeping current rates lower but extending the debt further into the future. Critics often describe this as a “kick-the-can” strategy that ensures the next generation of Galion residents will still be paying for the plant in the 2050s.
The Decision and Controversy: Was the Contract a Mistake?
The decision to sign the Prairie State contract in 2007 was a pivotal moment for Galion. To understand if it was “questionable,” one must look at both the global energy climate of 2007 and the specific ways the project was marketed to local officials.
Why Was the Contract Signed?
In 2007, the energy market looked very different. The administration at the time made the decision based on factors that seemed logical then:
- The “Mine-Mouth” Strategy: Owning the coal source seemed like a brilliant hedge against rising energy costs.
- Energy Independence: AMP marketed the project as a way for small municipal utilities to become “owners” of their own power source rather than customers of large corporations like AEP.
- Predicted Stability: Long-term forecasts showed that electricity from Prairie State would be among the cheapest in the Midwest for 50 years.
Why the Contract is Considered Questionable
In hindsight, many energy experts and investigative groups, such as the Institute for Energy Economics and Financial Analysis (IEEFA), have labeled these contracts a financial disaster.
- Lack of Risk Disclosure: Critics argue that AMP and the 2007 administration failed to account for “what-ifs,” such as the fracking revolution that caused natural gas prices to plummet, making coal-fired power much more expensive than the market average.
- The “Take-or-Pay” Trap: The administration signed a contract that lacked an “exit ramp,” committing the city to 50 years of debt with no way to cancel.
- Oversupply: Galion committed to buying more power than it actually needed, leading to “ghost payments” where residents pay for electricity that never enters their homes.
Political and Legal Fallout
- The PCA Surplus Controversy: In the mid-2010s, it was discovered the city had over-collected millions from residents via the PCA to build a “buffer” against the contract’s high costs, leading to public outcry.
- Calls for Investigation: By 2013, Galion City Council considered a resolution urging the Ohio Attorney General to investigate the deal, claiming AMP had not fully informed the city of skyrocketing construction costs known to industry insiders at the time.
Why Can’t the City Just Cancel?
The contract is essentially “ironclad” because it is tied to municipal bonds.
- No Opt-Out: There is no exit clause. If Galion stopped paying, it would likely face lawsuits from AMP and bondholders that could bankrupt the city’s utility department.
- Environmental Risks: New EPA regulations could force expensive upgrades or an early closure. However, under the “take-or-pay” clause, Galion would still owe the debt even if the plant stopped burning coal.
Summary for Residents
The Prairie State contract is the single largest financial commitment in Galion’s history. While the plant is currently more reliable than it was in its early years, the debt from its construction remains a permanent fixture on utility bills. The current “gradual” PCA increases are a management tool to handle a volatile energy market, but the underlying high-cost contract remains unchanged.
Works Cited (Click Here)
Prairie State Energy Campus Project Revenue Bonds Refunding Series 2021A (April 2025 Update) – AMP Bond Document
Why Should the Ohio Attorney General Be Asked to Investigate the Prairie State Deal? (August 2013) – Full Report via IEEFA
Galion Electric Power Issue Could Head to Ballot (January 2015) – Richland Source Article
City of Galion Regular Council Meeting Minutes (February 11, 2025) – Official PDF Archive
Council Votes on Pivotal Project, OKs PCA Rate Increase (August 20, 2025) – Galion Inquirer Report
Analysis: Prairie State Power Cost Skyrockets (July 2013) – IEEFA Financial Breakdown
Ohio Towns Have Buyer’s Remorse Over Prairie State Energy Campus (July 2012) – Canary Media Article
Key Figures & Entities
Tom O’Leary: Current Mayor (2026) and Mayor during the 2007 signing. He consistently defended the contract and vetoed the 2013 resolution for an investigation.
Donald Faulds: Former Council President; a leading critic of the contract transparency and the city’s utility fund surplus.
Roberta Wade: Former Law Director/Council Member; spearheaded the effort to involve the Ohio AG in investigating the “take-or-pay” structure.
2007 Galion City Council Members: Carl W. Watt (President), Ken Bodkins, Richard “Aaron” Ivy, Michael Richart, Tammy Siclair-Erlsten, Thomas G. Fellner, and Mark Triplett (seated during the contract finalization).
American Municipal Power (AMP): The non-profit broker and 23% owner of the Prairie State plant on behalf of its member cities.
Sawvel & Associates: The city’s utility consultants for nearly 20 years, responsible for the original projections and the current 2025–2026 rate strategy.