Archive for Thursday, December 13, 2007

Price of power: part II

December 13, 2007

Factoids on Baldwin City's rate comparisons

Baldwin City is provided most of its power by others, but generates its own power at times. The city's electrical rate is 10.3 cents per kilowatt hour, the highest around. For 900 kw used, that's $92.70; 1,200 that's $123.60; 1,500 that's $154.50.

  • Gardner charges 9.5 cents/kwh. That's $85.50 for 900 kw, $114 for 1,200 and $142.50 for 1,500. Gardner can alsgenerate power.
  • Eudora charges 8.6 cents/kwh. That's $77.40 for 900 kwh, $$103.20 for 1,200 and $129 for 1,500. Eudora buys from Westar.
  • Rural Douglas County, i.e. mostly KCPL, is charged 7.91 cents/kwh. That's $71.91 for 900 kwh, $94.92 for 1,200 and $118.65 for 1,500.
  • Ottawa charges 7.27 cents/kwh. That's $65.43 for 900 kwh, $87.24 for 1,200 and $109.90 for 1,500. Ottawa can generate and has other charges.
  • Lawrence charges 6.25 cents/kwh. That's $56.25 for 900 kw, $75 for 1,200 kw and $93.75 for 1,500 kw. Westar provides Lawrence's power.

While the pain of August's outrageously high electric bills is mostly gone, the memory of them is still in the back of the minds of most everyone in Baldwin City.

Count City Councilman Ken Wagner among them. While reports of $500 and $600 bills were many, Wagner topped them all. His August bill was right at $800. He brought it to a city council meeting to show.

"The nearly $800 utility bill I received was certainly a shocker," said Wagner, who has served two stints on the city council, has been on the utility committee for years and was on the council that decided to build the new power plant. "Our utility bills had been consistently high, but that one was totally unexpected.

"After receiving it, I did do an 'audit' of our electricity usage at our home and I determined that we had a lot of 'things' plugged in that somewhat justified the amount," he said. "Things like two refrigerators, freezer, swimming pool, yard lights, air conditioning turned down to 70 degrees to the heat of the summer, pumps in the gold fish pond, hot tub, etc, all contributed to this. As a result, we have changed some things on how much electricity that we use."

A powerful decision

Those changes were personal for Wagner. As a member of the city council in the early 2000s, the decision to continue in the power generation and distribution business was for the city as a whole. Wagner still believes it was the only answer.

"When I first ran for city council, I felt we needed to get out of the electrical generation and distribution business," said Wagner. "It was only after I was on the council and had a chance to thoroughly look at the budget that I realized the electrical department generated a lot of revenue and paid for a lot of bills in the city."

The city also looked at the time for an outside entity, most notably Kansas City Power and Light, to take over the city's electrical system. That didn't work.

"I think it is important to note that there are two segments of the power business," he said. "One is generation and purchasing, the other is distribution. At the time, we contacted KCPL to see what their interest was in taking over the city's electrical needs.

"It was a frustrating process as we had difficulty getting anyone with KCPL to address this question," said Wagner. "In the end, KCPL was more than willing to provide the city power, but they wanted nothing to do with the distribution system -- the lines, poles, transformers, substations, etc."

There was more to the decision, too.

"The other important thing to realize is that with Baldwin, we are at the 'ends' of two power systems," he said. "We are at the end of the line on where KCPL serves and the end of the line where Westar serves.

"So, in essence we are in kind of a 'no man's land,'" said Wagner. "At the time, our distribution system was antiquated and needed modernized. We had a lot of line losses and voltage was somewhat unpredictable."

As all the factors became apparent to the council back then, the decision became easy.

"It became obvious to us that we had no choice but to stay in the power generation and distribution business," he said. "So, we decided to make a large investment not only in the power plant, but in the distribution side of the business as well. We went ahead with line improvements, installation of capacitors, etc."

That was necessary after years, if not decades, of neglecting the electrical distribution system by previous city administrators, department heads and -- bottom line -- city council members. There was one last factor, too.

"It is also important to note that at the time the decision was made to invest in capacity at the power plant, we were maxed out on our capacity," said Wagner. "Our contracts with the Kansas Energy Management Association (KMEA) required that we have a certain amount of capacity.

"This capacity was not only purchased power, but generated capacity," he said. "Something had to be done to stay in compliance."

That price of power

Baldwin City's electrical rate of 10.3 cents per kilowatt hour is easily the highest among neighboring cities. Gardner isn't too far behind at 9.5 cents/kwh and also does some power generation.

Ottawa is at 7.27 cents/kwh, also generates some of its own power and has additional charges on a monthly basis, including a surcharge to factor in the price of fuel. Baldwin City doesn't do that.

Eudora's rate is 8.6 cents/kwh, rural Douglas County -- i.e. mostly KCPL -- is 7.91 cents/kwh and Lawrence is 6.25 cents/kwh. None of those include power generation. Both Lawrence and Eudora are Westar customers, although Eudora owns its power distribution system.

Baldwin City only generates power during the peak usage time of the summer and during winter emergencies, which amounts to an average of 400 hours per year. Otherwise, the power comes via KCPL lines, but is mostly from contracts with Grand River Dam Authority (GRDA) for 3 megawatts, Kansas City Board of Public Utilities' Nearman Plant (BPU/Nearman) and KCPL.

Building the new plant and upgrading the city's distribution system resulted in debt service to the city of $690,000 per year. Factor all of those numbers together and that's where Baldwin City's rate comes from.

"In 2006 -- which was not a particularly hot year -- we spent over $825,000 purchasing power from GRDA," said City Administrator Jeff Dingman. "We also spent $448,499 purchasing from BPU/Nearman and $128,771 in purchasing power and load following services from KCPL.

"Add to this the approximately $690,000 per year we pay in debt service for the electric utility and you have a pretty good idea where much of our utility revenue rate goes," said Dingman. "Add up those four annual expenses, divide that by 12 and then divide it by 1,500 -- which is about how many electric customers we have on our utility -- and you'll see, on average, about $116 per month from each customer goes to pay those four items."

But, that's not everything involved.

"That still doesn't take into account salaries, materials, supplies or equipment costs to operate and maintain our facilities and distribution system," he said.

As for the debt service, that stems from the start of upgrades in 1999. That year, there was a bond for $1.13 million to build the Newton Street substation and an upgrade for the transformer at the old power plant; in 2000 there was $450,000 to fix an engine at the old power plant; in 2001 there was $400,000 to upgrade distribution; and there were two in 2002 -- one for $1.93 million to upgrade distribution and one for $5.35 million, which was the new plant.

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