A bill awaiting the governor’s approval would require growing cities to reimburse electric cooperatives for the revenue and territory lost through municipal annexation of serviced lands.
Mike Muirhead, Garden City’s director of public utilities, said the bill introduced this session cleared the House on Wednesday and has officially moved on to the governor’s office. It passed through the Senate with a vote of 38-0.
The bill requires reimbursement even when annexed properties are totally undeveloped. Muirhead said the City of Garden City has been active in its role in negotiations to produce a bill that works for all parties, who have been represented respectively by the Kansas Municipal Utilities and Kansas Electric Cooperatives groups.
Muirhead noted that a previous version of the bill would have required 10-year compensation in the amount of 15 percent of the gross revenues of total retail sales on electric utilities generated by new customers in annexed territories where a cooperative’s service rights are terminated. Negotiations lowered that rate to 8.5 percent.
Because Garden City continues to grow and annex properties, the bill is set to have an unavoidable effect on city coffers, and all annexation at this point would specifically involve a transactional relationship with the Wheatland Electric co-op, which has a franchised service area surrounding Garden City.
City Manager Matt Allen said the City Commission would make decisions on annexation if and when they present themselves, taking associated costs into consideration, as well as the degree to which those costs would be borne by new customers or absorbed by the city’s electric utility as a whole.
During a Legislative Coffee event at St. Catherine Hospital on Saturday, legislators weighed in on the issue in response to a question by Calvin Campbell, a member of Garden City’s Public Utilities Advisory Board.
“I don’t understand it completely,” Campbell said of the bill. “Our community here does an incredible job with keeping power affordable for our constituents, and this bill looks like it could put us in an adverse position when it comes to expansion outside of our current city limits.”
Rep. Russ Jennings, R-Lakin, said the bill represents southwest Kansas’ version of urban vs. rural.
“We have in our part of the state dedicated territories to electric cooperatives to provide services,” he said. “If Garden City would quit growing, it wouldn’t be a problem, but we want Garden City to continue to grow and be a growth community. And what happens is when Garden City grows, it encroaches into what currently exists as a franchised, dedicated service area for Wheatland Electric.”
Jennings says he believes the compromise that was reached avoids greater potential for harm to both parties.
While most annexations would pertain to undeveloped lands, Muirhead said, Jennings noted that a reduction in demand for Wheatland’s electric services would result in an increase in costs to all consumers on the co-op’s power grid.
“If Garden City hadn’t grown over the last 20 years, there’d be nothing to talk about,” Jennings said. “But it continues to grow, and that’s really a good thing for the area generally and specifically serving the people in the city of Garden City.”
Jennings said he would vote for the bill, even though it was a “tough issue.”
Sen. John Doll, R-Garden City, said the bill is “everything that’s wrong with government.” He said he understands the desire among electric companies to recoup money for infrastructural investments, as they have in the past, but he said to do so in the case of new customers and developments on annexed “bare ground” creates a “horrible issue.”
Doll also noted that surrounding communities stand to benefit from the bill. Because companies like Wheatland can charge Garden City more than what they were making on the annexed land, Doll said, customers outside of city limits could actually see a reduction to their electric bill.
Doll voted for the bill, but also said it was a difficult decision. He said nine of the 10 counties he represents would benefit, but Garden City, which he says comprises 60 percent of his constituency, faces a disadvantage. Other cities such as Manhattan, Doll said, are in a similar situation.
“I don’t know how this is not a monopoly,” Doll said. “I don’t know how this doesn’t violate the antitrust laws. If we’re going to be a republic, then competition should drive the market. And we can’t compete.”
Rep. John Wheeler, R-Garden City, said he would have voted with Garden City if the compromise had fallen through.
Still, the former county prosecutor said he’s pleased that the parties involved have reached a settlement, “even though I do understand that nobody is happy.”
Contact Mark Minton at firstname.lastname@example.org.