PITTSBURG — For the third meeting in a row, the Pittsburg City Commission discussed the city’s electric utility study Tuesday, but shared some new details following the cancellation of its non-disclosure agreement with Evergy since its last meeting.
Towards the end of Tuesday’s meeting, Commissioner Dan McNally brought up the city’s ongoing municipalization study, saying he recently received a letter from Evergy (the new brand name for Westar following its merger with KCP&L) about its survey of local residents last month.
“78% of Pittsburg residents have a favorable view of our reliability,” Evergy wrote in its Sept. 30 letter, citing its survey. “Knowing that nearly half of the electricity Evergy provides homes and businesses comes from carbon-free sources results in 82% preferring Evergy as their energy provider.”
McNally said Tuesday he would like to “get the city’s take” on where its negotiations currently stood with Evergy.
“If we could get some kind of update I think the public would appreciate that,” McNally said.
As he has pointed out in the past, Deputy City Manager Jay Byers said Tuesday that the city still doesn’t know if electric municipalization is a good idea for Pittsburg.
“We’re trying to gather some numbers that will tell us — before we could even think about bringing a recommendation to you — so there’s a lot that we still need to know,” Byers said. “And to date we’ve spent about $97,000 trying to find that out.”
About a third of that has been spent on legal fees, a third on engineering work, and about a third “on kind of financial and communication efforts,” Byers said.
Some of those communication efforts include videos that will soon be viewable on the city’s website as well as information the city will send to residents by mail.
“You’ll start seeing some information, educational pieces starting to be released next week,” Byers said.
Commissioner Dawn McNay said she had heard a rumor that the city had already spent $1 million on its municipalization study. Byers said this was not true, again noting that the city has spent less than $100,000 so far. The city has identified where in its budget it could find up to $1 million to pay for studying municipalization, however, although it has not actually set aside that money.
At each of the three city commission meetings since Evergy commissioned a survey through text messages and robo-calls in September, city officials have discussed their concerns about the survey, which City Manager Daron Hall called an “unscientific, obnoxious push poll” at the Sept. 24 meeting.
“I know when the survey came out and my phone was lighting up and everybody’s wanting answers and it’s like, ‘I thought we were operating in good faith,’” Hall said Tuesday. “It doesn’t feel like it.”
Byers said that in an email Sept. 27, an Evergy representative dropped the non-disclosure agreement it had previously demanded in its negotiations with the city. In response, Byers and other city officials said they could discuss more details than they previously had about its own municipalization study as compared to numbers from a report from Concentric Energy Advisers that was commissioned by Evergy, which apparently was the basis for a question in the Evergy survey that implied municipalization would cost Pittsburg $130 to $150 million.
McNally said Tuesday the Concentric report was “kind of going around” and Byers and Hall discussed it at the meeting, but while Byers confirmed Wednesday that the city had obtained the full report, he said the city was not comfortable sharing it with the Morning Sun.
The Concentric report, however, “was clearly designed to dissuade us from considering municipalization,” Byers said Tuesday.
“The bottom line is we need some realistic numbers. The decision to municipalize will boil down to essentially three numbers.”
Those numbers include the cost of acquiring the electric grid.
“We need to know how much it’s going to cost for us to buy the wires and the transformers and things that we need to bring electricity to these homes,” Byers said, adding that Evergy currently pays taxes on $15 million worth of property in Pittsburg. “That’s just a base floor for the discussion,” he said.
The second key number the city needs to know is the cost of separation — “to create a Pittsburg separate utility from Evergy’s customer base and then allow those two customer bases to be served without disruption,” Byers said, adding that the city’s estimate of $5 million for this cost differs significantly from the $55 million identified in the Concentric report commissioned by Evergy.
“So there’s a big gap there,” Byers said, adding that the city needs more information about the reasons for that gap and has sent a list of questions to Evergy about it.
The third major number that the city needs before city staff can make a recommendation to the commission is the actual cost it will have to pay for power.
Evergy’s Concentric report uses a cost of about $76 per megawatt hour, Byers said, while other providers the city has met with quoted a cost of $45 to $49 per megawatt hour.
“The quotes we’re getting from our providers — that’s a delivered power price to Pittsburg — is over 30 percent lower than what’s in the Concentric report,” he said, adding that Pittsburg’s original feasibility study that allowed the city to move forward with its municipalization study estimated a cost of about $57 per megawatt hour, which now appears to have been a conservative estimate considering the latest quotes the city has received.
While taking over providing its own electricity is something Pittsburg has not attempted in the past, both Byers and Hall said, Evergy has also not gone through a municipalization process, so the company has no more experience with it than the city does.
Mayor Patrick O’Bryan said based on previous conversations with Byers it was his understanding that other municipalities, including similarly-sized cities in Kansas, are interested in Pittsburg’s municipalization efforts and are “watching what happens to Pittsburg and our utility, and they are licking their lips.” O’Bryan added, however, that “they’re letting us go first.”
Commissioners Chuck Munsell and Dawn McNay both questioned whether — even if Evergy’s estimates really are too high — the city’s cost estimates might be too low.
“Just because (Evergy) says it’s $130, $150 million, doesn’t make it so,” McNay said. “Just because we say it’s $5 million doesn’t make it so. So for people to go out and claim that’s it is misinformation.”
In response to a question from Munsell about the difference in estimates, Byers said a third party would eventually probably have to mediate the discussion.
Hall noted, however, “in defense of the people,” who wanted more information about the municipalization study, that Tuesday was the first time the city had released some of its own numbers. He also noted that even if Pittsburg does eventually go through with municipalization, Evergy will continue to serve surrounding communities.
“They’re going to be our neighbor,” Hall said. “We’re in this for the long haul with Westar one way or another.”