KMEA leaders address Kiowa City Council about exorbitant 'Arctic Blast' electric bill
Pay the bill or face ramifications
June 2, 2021
The Kiowa City Council chose to pause before paying their entire near $135,000 bill to the Kansas Municipal Energy Agency (KMEA) from the Arctic Blast in February, which caused their bill to skyrocket. Kiowa's monthly electricity bill to KMEA is typically from $20,000 to $30,000.
May 25 the city council held a special meeting with KMEA officials present. One was General Manager Paul Mahlberg who said he started just before KMEA brought Kiowa in to the EMP3 group. The other was KMEA President Greg DuMars, who has been the city administrator at Lindsborg, Kansas, for 23 years. Also attending was Energy Management Project No. 3 (EMP3, which delivers electricity) Chairman Lucas Neece.
Mayor Bill Watson was present with all councilmembers including: B.J. Duvall, Brian Hill, R.L. Simpson, Jason Thayer and Tom Wells. City Administrator Sam Demel and City Clerk Kady Tucker also attended. City Attorney Brandon Ritcha joined by speaker phone.
DuMars said, “We (Lindsborg) started taking all our power from KMEA June 1, 2020. In that first six months we saved over a half million dollars. It was an excellent, excellent move for us,” he said.
He said the group meets monthly to review resources. They see how each city is managed. “It's a great opportunity to transition our resources and have better savings – to work together and help each other,” DuMars said.
Mahlberg gave some background information regarding Kiowa's membership. He said Kiowa moved to KMEA in 2015-16. KMEA existed since 1980. Kiowa joined EMP3 Jan 1, 2016. “You were going to have your rates raised by Western Farmers/AEC so you looked at other options and picked us,” Mahlberg said. Kiowa's new contract was January 1, 2021. “We estimated you'd save 1 to 1 ½ cents per kilowatt hour.”
Kiowa is one of the 22 cities in EMP3. Kiowa buys capacity. That market started in 2014. Mahlberg explained all your load is bought from the market at market price that's set by SW Power Pool based on the utilities offering in generation. Then you get compensated with the resources you have. With your energy contract, you pay a fixed rate, you get paid whatever those market prices are. If you run your generator you get paid whatever those price are for the kilowatt hours you are producing.
The SW Power Pool covers the midwest from Texas up to North Dakota and all of Kansas, Oklahoma and Nebraska, and part of Arkansas and Missouri. All utilities have to participate in the SW Power Pool market.
So when this event in February happened natural gas prices spiked. Mahlberg said in Kansas they went to over $600/unit of gas. “We heard in Oklahoma it was over $1,000. In our careers the highest price we've heard is only $30 over so it was 20 times higher than it's ever been. That gas price whittled down to the big gas units that produce electricity so they were paying those higher gas prices which created these high electric prices.”
He continued, “The SW Power Pool has a “soft cap” of $1,000. So you can't offer generation over $1,000 per megawatt hour. Unless your costs are over that. So when these generators bought gas at these high prices, the cost to produce this electricity went to $3000 to $4000/megawatt hour. They are allowed to do that because that's what their costs were. So they are not profiting, supposedly, somebody else is – the gas supplier? So when this cold weather hit, we saw those $3000 and $4000 prices. Kiowa and all our members were paying that price for their load.
“When we saw these high prices we went to weekly invoicing – requiring cities to pay us weekly. So we could pay the gas bill. During this two week period our bill for our 42 city members was $20 million dollars. So we were hanging by the cliff, hoping our cities could pay so we could pay the SW Power Pool.
“All the cities paid but three including you. Those two paid shortly thereafter so Kiowa is the only one who hasn't paid. Kiowa's bill is $135,000. We're looking to you to pay your share of the bill. The burden of Kiowa not paying is on the rest of the membership.”
Mahlberg reiterated that KMEA is taking steps to get Kiowa to pay. The ramifications for not paying the bill are very severe.
Councilmember Simpson said why the council paused and didn't pay their bill: “because something was seriously wrong. Wait a minute, the little man is getting hit hard.”
Councilmember Hill said another concern regarded whether the city should be generating their own electricity at that time with Kiowa's generator because of the high-priced gas. Hill said there was a real communication problem between the city and KMEA. “They didn't know we were generating electricity when we were.”
Demel explained there are three electric rates – the “contracted amount” (Kiowa will purchase this much every day at this rate); the “day ahead price;” the “real time purchase price” if Kiowa goes over what they purchase.
Mahlberg admitted, “There was a big breakdown in communication.” He said that KMEA can't see the city's generation of electricity. He said KMEA is working to fix that. Hill said they must streamline the communication process. Demel confirmed there was a definite communication problem. He said KMEA's staff did not talk to each other. “Part of their staff was purchasing the 'day ahead price' for us and we did not need it. But we were not charged for that,” Demel said. He explained, “At one point they told us not to run our generator and we should have been.” There was a question with one KMEA employee regarding the correct phone number for the City of Kiowa's office phone number.
Councilmember Wells asked if they can drop the interest charge if Kiowa pays the bill. Mahlberg said he'll take it to the executive committee in June.
After hearing KMEA's presentation, the council voted 5-0 to pay their outstanding bill in full to KMEA.
Kiowa's Burn Site and Eyesore Properties
Former Kiowa Mayor Brandon Farney approached the council. He told them he was the one who disposed of old wooden fence posts and railroad ties in Kiowa's Burn Site. “It's all wood,” Farney said of the old wooden posts and railroad ties that were on his family farm dating back to his grandfather's time. Realizing the burn site is for tree limbs and grass clippings, Farney said, “If that's a violation I'm sorry. We weren't trying to pull anything. I wouldn't do anything to hurt the city. I spent too much time here,” the longtime mayor and councilmember, said which brought laughter among the group.
Hill said the city does need to have a citation for illegal dumping. The council authorized Demel to research what the city has on the books or if they need to take action about creating one.
At the regular May meeting of the council, a group of citizens led by Brenda Myers addressed council about eyesore properties throughout the community. Demel said citizen Jeff Bryan told him he has some people, who wish to remain anonymous, and are willing to help financially for the clean-up of these properties. Demel said Bryan is also asking the city to contribute financially toward the clean-up. The tentative plan is to split the cost into thirds among the city, donors and property owners. Demel said at the June meeting, the council will vote on this and the amount of money the city will put toward the clean-up efforts.
Demel confirmed the city had four applicants for the two open positions for summer help. Demel said he's hired one person who will start soon. He's still in the process of interviewing and hiring the second position.