MADISON — One more local entity is eyeing natural gas as a way to reduce costs for area consumers, only this time the gas would generate cheap electricity.

Madison Electric Works is researching what could be a $10-18 million project to install a natural gas-fired boiler to produce electricity. The new system could lower costs to its approximately 2,500 customers in Madison, Anson and Starks by 10 to 15 percent, Superintendent Calvin Ames said.

“It’ll be huge if we do it,” he said. “If we built a generating plant it would at least double the total assets of Madison Electric.”

The utility has been examining ways to generate its own power for several years, Ames said. It shut down its dam on the Sandy River in 2006 and now buys power from NextEra Energy, a subsidiary of Florida Power and Light Co.

Madison Electric considered using wind power and then biomass to produce electricity until it learned of Madison’s former plan to construct a natural gas pipeline through central Maine, Ames said. That prompted him to take a closer look at natural gas.

Portland-based Kennebec Valley Gas Co. is now the sole entity planning to build the pipeline, after Madison voters rejected the town’s $72 million proposal at the polls. But even if Kennebec Valley Gas does not build the line, Ames said, Madison Electric can truck in liquefied natural gas.

That is how tomato grower Backyard Farms gets its gas, he said. Madison Paper Industries will soon have liquefied natural gas delivered in trucks as well.

“Trucking the gas, from what I’ve learned so far, is still cheap, but you would save an additional 15 percent on the cost of the gas if you had a pipeline,” Ames said.

“If we have our own unit we can pretty much assure that our rates will be low way into the future,” Ames said. “It would pretty much fix it for 25 years. There would be very little fluctuating in cost after that.”

Madison Electric would likely bond for the generating plant and then pay back the loans with the revenue generated by the project. The utility pays about $300,000 per month to its energy provider. If it generated its own electricity, it would use that money to pay down the bond, Ames said.

Though Madison Electric is governed by a board of directors and is organized as a nonprofit entity, it is legally a department of the town. Bonding would therefore require approval by Madison voters.

Madison Electric would not request general obligation bonds, where the availability of public money is used to guarantee the loan’s repayment. Rather, it would seek revenue bonds, which are paid back entirely by project revenue.

“Our bond is not paid off by taxes. It’s paid off by revenue,” Ames said.

Residents wouldn’t be voting on the bond for at least a year, however. In the coming months, Madison Electric will determine specific costs for liquefied natural gas and electricity generation. If those numbers are favorable, Ames said, a generation plant will be designed, likely for Madison Electric’s property on White School House Road.

When blueprints are completed, Madison Electric will have a final cost projection and be able to specify a bond amount, Ames said.

Once construction is completed, burning gas would turn a turbine and generate electricity. The heat produced would boil water to create steam that would turn another smaller turbine, which would also generate electricity.

Erin Rhoda — 612-2368

erhoda@centralmaine.com