PITTSBURG — Among other topics discussed at Tuesday’s Pittsburg City Commission meeting, Deputy City Manager Jay Byers provided an update on the city’s ongoing efforts to evaluate whether it should establish a municipally-owned electric utility.
Byers noted that this was the first update on those efforts since March, and said it had also occurred to him that he should provide some additional background about why the city is looking into possibly taking over providing electric service from Westar Energy (Evergy, Inc.)
Byers said the city first began exploring the possibility of municipalization because of electricity costs increasing at an unsustainable rate. The merger of Westar, currently the city’s electricity provider, with Kansas City Power & Light (KCP&L) to create the new company Evergy also played a role in the city’s decision-making process. “Some time in 2019,” according to Westar’s website, the two companies will transition to using the single name Evergy.
“The new provider will be based in Missouri, not a Kansas corporation any longer,” Byers said. “Not that that’s necessarily a problem, it just gives us a little bit of a pause.”
So far, Byers said, the city has hired consultants, met with Westar, and studied the feasibility of electricity municipalization.
“What we have learned through the feasibility study and through some of our research is that the city can buy power cheaper,” Byers said. “We have a great chance to stabilize the rates and possibly even lower our electricity rates. That is certainly on the table.” He also said there are misconceptions about the city’s plans. Byers said he got a call on Tuesday from a longtime resident who said she didn’t see how the city could afford to build a power plant.
“[City Manager] Daron [Hall] and I explained to her ‘Well we’re not buying that, we’re just buying the distribution grid. We can buy power, you know, elsewhere,’” Byers said. “And once we explained to her what it was she was like ‘Oh, well I guess that makes sense.’”
Later in the meeting, however, in response to a question from Commissioner Sarah Chenoweth as to whether the city could generate its own power, Byers said it could.
“That is correct,” Byers said. “I wasn’t going there. But yes, we can. Long term, I mean, when we look at the different scenarios, it is likely that some level of generation is going to be beneficial to us, all right? Short term we’re not going to do any.”
If the city doesn’t buy electricity from Westar, it could potentially buy power from any other provider it decides to, Byers said. He displayed a map of regional power providers that the city could potentially buy from within what is known as the Southwest Power Pool, but pointed out that the city’s options are not limited to those providers in nearby states.
“We could buy our electricity from California if we wanted to,” Byers said, though he noted that “obviously you have to pay the transmission fees for all of that.”
Commissioner Chuck Munsell brought up the possibility that there could be a downside to the city taking over providing electricity.
“I’ve asked for both the pros and cons of us doing this, and I never have the cons, it’s all the pros,” Munsell said, adding that he’s looked up information about cities that have followed through on a plan to supply power and done it for a few years.
Munsell said some cities that had taken over providing electricity later wanted to go back to using an outside provider. One issue, he said, was the length of the commitment they got themselves into for buying power from a specific provider, which could be up to 20 years. He said he’d appreciate if Byers could look into some of the potential pitfalls that other cities may have experienced after taking over providing electricity.
“So that when it comes down to the point that we might decide to do this, we have all the information,” Munsell said. “And I think that would be good for the citizens, because surely they will be able to be the ones that vote on this.”
Munsell said he’d previously understood that Pittsburg citizens would have the chance to vote on the municipalization plan, but that in speaking to City Attorney Henry Menghini, he’d been told that this was not necessarily the case.
“Chuck, that’s our decision,” Commissioner Dawn McNay said, interrupting Munsell, before apologizing. Munsell said he stood by his position that municipalization should be put to a vote of the citizens rather than decided by the commission.
Munsell said communities he researched that had created a municipally owned electric utility and later had problems associated with that decision included Vero Beach, Florida and Georgetown, Texas. City Manager Hall then said he wanted to respond to Munsell.
“Florida and New Jersey or whatever one, that’s great,” Hall said. “So we’re in Kansas. There’s 622 cities in Kansas. 125 of them have public power. There’s actually some that are nearly our size.”
Byers later corrected Hall, saying there were 118 cities in Kansas with a publicly owned electric utility.
Hall said, however, that one example of a city in Kansas that was similar to Pittsburg was Garden City, which went through the exact scenario described by Munsell.
“They had a 20 year contract for power, and they spent two years fighting with the legislature trying to get out of their agreement for power because 20 years is too long,” Hall said. He added that Garden City eventually saved millions of dollars, however, and shorter term agreements for buying power are now available.
“You can buy power for 20 years if you want to, you can also buy it for 15 minutes,” he said.
Hall also said it was “time that everybody quit listening to us, and quit listening to you [Commissioner Munsell] and got educated. This is English, and we don’t need to hear Chuck say that we all need to continue to get out and pray that we’re going to vote on this. The commission’s going to make that decision in time. What we’re doing right now is we’re at a very important educational period, and we don’t want to get too far down the road.”
Byers said the city first met with Westar in April and has since met with company representatives several times. He noted that the city agreed to sign a non-disclosure agreement with the power company in May.
“They didn’t want us to share a lot of the details of the negotiations we’re having,” Byers said. “So we’re a little bit constrained about what we can talk about in terms of what happened, but we are getting into some pretty deep information about data that we need to be able to present to you to decide whether or not this is a good idea to move forward with.”
Chenoweth said people had been asking her for an update on the municipalization plan but she didn’t have much detail to give them. She asked Byers to clarify that the NDA was signed at Westar’s request, which Byers said was correct.
“We’re not hiding information is I guess what I’m trying to say,” Chenoweth said. “I mean technically, yes, but legally.”
In June, Byers said, city officials met with the Kansas Corporation Commission (KCC), the state agency that regulates utility rates.
So far, the city has spent just over $57,400 over three months on studying municipalization, Byers said. That might seem like a lot, but the city is “being as frugal as we can be with those funds,” he said.
Mayor Patrick O’Bryan said as far as he’s concerned, “$57,000 is not much money when you’re talking about making a purchase of this magnitude.”
Hall said he wanted to reassure the commission that the money was being well spent.
“I mean this thing is being actively managed to keep the costs down,” he said. “We understand while $57,000 isn’t, you know, an enormous amount of money, it’s $57,000.” Hall added that the city is spending the money studying electricity municipalization instead of doing something else with it, so being efficient was important.
Commissioner McNay noted that Kansas has higher electric rates than neighboring states, but also that the state government may soon make its own moves to reduce them. “Senate Bill 69 authorized the KCC to start looking at rates because we’re so high,” she said, “and I’m sure that that’s, you know, part of their strategy for economic growth is to get those costs down.”
Commissioner Dan McNally asked if Byers had a timeline of how long its process of studying and negotiating a potential plan to take over providing electricity might take. Byers said he thought he’d be able to come to the commission by the first quarter of 2020 “with what we consider to be numbers that we’re comfortable with to determine whether or not we should move forward.” Byers added, however, that the process could take “well into next year, particularly if we are unable to come to terms and we have to go through the statutory process.”
After hearing the presentation McNay said she thought the commission did not have enough information yet to know if it will eventually move forward with municipalization, or if there will be a public vote on the matter. O’Bryan agreed.
Byers said one issue with the process is communicating what the city is doing to the public.
“There is so much misinformation out there,” he said. He asked the commission to approve spending an unspecified amount of money on communicating about the process to the public.
“I don’t disagree with what you’re saying, Jay, about using some of the already approved funds to pay for communication, but I would like to see it in writing,” Chenoweth said. Other commissioners agreed that they would like to see a written proposal for funding communication with the public about the municipalization process.
Hall said the biggest consideration will ultimately be the number Westar eventually proposes to the city and whether it seems acceptable.
“The number that Westar’s going to come back with, that’s going to drive it,” Hall said. “I mean, if we’re miles apart, the negotiation is going to be a much different animal.”