City turning to KMEA for power
Partnership with Wheatland, Sunflower ending after 2013.
Partnership with Wheatland, Sunflower ending after 2013.
BY SCOTT AUST
Citing a desire to act in the best interests of the public, the Garden City Commission decided Wednesday to pursue a contract with the Kansas Municipal Energy Agency for the city's power supply needs, starting in 2014.
Mayor David Crase said Wheatland Electric Cooperative and Sunflower Electric, which sells electricity to Wheatland, which in turn sells it to the city, have been good partners, but the commission needed to do what was best for city electric customers and for growth.
"If we've got higher rates than anybody in the state, we're not going to get economic development. We need to look at our own generation where we can actually be competitive with our rates," he said. "It's strictly business. It's nothing personal."
Garden City's search for a cheaper alternative to provide its power needs began more than a year ago, when Wheatland indicated it would pass on 6 percent rate increases annually over the next few years.
Under the KMEA proposal, Garden City would buy excess power generated by other KMEA member cities and also generate up to 28-megawatts itself using three natural gas-fired generators.
KMEA formed in 1980 when a group of northwest Kansas cities were looking to create adequate, economical and reliable long-term power supplies for their customers by sharing capacity, exchanging electricity and buying power on the open market. Initially, there were 21 member cities. Today, KMEA's membership includes 78 cities throughout the state.
Garden City would join KMEA Energy Management Project No. 2, which includes the cities of Ashland, Beloit, Hoisington, Lincoln Center, Osborne, Pratt, Russell, Stockton and Washington. The nearest member cities include Lakin, Cimarron, Hugoton, Dighton and Jetmore. Garden City would be the largest member city in southwest Kansas.
The commission voted in early December to end its contract with Wheatland, though Wheatland will continue to supply power to the city through the end of 2013. Over the past several weeks, the city's third party consultant took one last look at proposals from Wheatland and KMEA for future power needs from 2014 and beyond.
John Krajewski, a consultant with Nebraska-based JK Energy Consulting, said in the first five years, the KMEA proposal would cost about 8 percent less than the Wheatland proposal, and over 15 years the KMEA plan is about $8.6 million less.
"One advantage with the KMEA proposal is you'll have local generation connected to your distribution system that's going to provide additional reliability," Krajewski said.
Based on the information provided, Krajewski recommend moving forward with the KMEA proposal. He said adding self-generation capacity would give the city greater control over long-term costs and increased stability when compared to purchases from resources that are owned and operated by third parties.
Stuart Lowry, president and CEO of Sunflower Electric, said that projected over 15 years, the Wheatland proposal is only 2.6 percent more than the KMEA proposal, which is roughly $8 million over that period. He said Sunflower pays $8.4 million in property taxes every year to Finney County.
Lowry also questioned whether KMEA could deliver the supply it proposed and whether capacity is available to meet Garden City's needs.
"We're in the same transmission market as every other supplier in the Southwest Power Pool. If you don't have firm transmission agreements in writing, that's going to cast a huge cloud of doubt over the deliverability of their proposal," he said. "The economics change dramatically if there isn't deliverability. All the savings projected by your consultant would be wiped away."
Krajewski said he had reviewed the transmission proposal from KMEA and called it reasonable and appropriate, and expressed confidence that transmission access will be available.
Bob Poehling, KMEA general manager, said KMEA has offers from several competitive power suppliers and would pursue arrangements with those suppliers after Garden City made its decision. He called Lowry's transmission concerns misleading, saying that KMEA's power supply plan doesn't include using the SPP process.
"We've gone through our transmission plan with your outside consultant and outside counsel at great length. You heard earlier they are very comfortable we can provide transmission service to Garden City," Poehling said.
Poehling said KMEA's proposal will change the city from being a "price taker" to being a "price maker" in the electricity market.
"It will change you from being the customer of a local distribution co-op, to one of having utility status and being in control of your own power supply," he said.
The commission voted 4-1 to finalize a power supply contract with KMEA. Commissioner John Doll was the lone no vote. He said he still had some questions about how much KMEA could raise rates in a given year, considering Wheatland is limited to no more than a 6 percent annual increase.
"I didn't like a possible 6 percent increase every year like Wheatland's had, but I knew what we had. With the KMEA plan, I wasn't sure what we had," Doll said in an interview later Wednesday. "I'm certainly excited about KMEA. I think they're going to be a great company. I'm sure it's going to work out great."
Commissioner Dan Fankhauser said he originally wanted to sign a seven-year contract with Wheatland and did not like committing the city to a 15-year contract.
"I certainly understand loyalty, and Wheatland has been a good supplier for us over the years," Fankhauser said. "I like to have a little flexibility, and it sounds like we have some that we didn't before (with KMEA). The strongest point with KMEA is they're by far the most transparent in their process, and I do like that."
In other business, the commission accepted Doll's resignation, effective at the end of the meeting. He was elected in November to represent Kansas House District 123 and is leaving the city commission to begin his state legislative duties.
Doll thanked past and present commissioners, Crase, former City Manager Bob Halloran and current City Manager Matt Allen, senior staff, city employees and his family.
"I feel like I'm the luckiest guy in getting to know and work with a lot of you. I've developed some true friendships that have really enriched my life. I'd like to give a shout out to Garden City and the citizens of this great city. Thank you, Garden City, for giving me this opportunity to serve," Doll said.
The commission has scheduled a special meeting for 10 a.m. Tuesday to discuss the seven applicants seeking to fill Doll's seat and to make the appointment.