When the Marion?City Council approved a 20-year contract with Kansas Power Pool, it agreed not only to buy wholesale electric services, but also became part owner of a power plant in Missouri.
Larry Holloway, KPP operations manager, and Carl Myers, director of member services, attended the Jan. 23 meeting to answer questions before the council made its decision.
“The Kansas Power Pool had the opportunity to buy Dogwood Power Plant as a municipal energy agency,” Holloway said. “This is the first time member cities have gone together and purchased a portion of a power plant, and under a longer-term agreement to keep the costs down.”
The Dogwood facility, located north and east of Harrisonville, Mo., is unique, according to Holloway.
“(Dogwood) is a modern natural gas plant that meets stringent environmental requirements,” he said, “and we will be buying 40 megawatts out of the 650 megawatt power plant with a group of other cities.”
Other groups owning the plant, he said, included the Kansas City Board of Public Utilities, the city of Independence, Mo., and Missouri Public Utilities Association, which is a cooperative similar to KPP.
The Kansas group, he said, asked the consulting firm of Burns & McDonnell, headquartered in Kansas City, Mo., to conduct a study on the Dogwood Power Plant.
“They said if KPP acquired this resource, it would save our members roughly 2.85 percent each year over the next 20 years as compared with not having it,” Holloway said.
The advantage for cities signing a 20-year contract as opposed to a short-term agreement, he said, would be that they would get the saving benefits of the Dogwood plant outlined in the study.
“The savings for a 20-year agreement would be a little over $18,000 a year,” Holloway said.
Almost two-thirds of the KPP members cities have signed 20-year agreements, he said, including Hillsboro, Ellinwood, Oxford, Wellington, Winfield, Minneapolis, Utica, Kingman, Greensburg, Lucas and Holyrood.
City officials were also invited to tour the Dogwood plant to see how it operates, he said.
“It has combustion turbines that use natural gas to generate electricity, and the exhaust gas that comes out is pretty hot.”
Holloway said the gas is then run through a heat exchanger that boils the water; the extra steam that is heated would have been lost in the environment, but instead it is used to generate additional electricity.
“Engineers call it a combined cycle plant,” he said, “because it approaches efficiencies of 50 to 51 percent.”
Typical coal and nuclear plants operate at about 30 percent efficiency, Holloway said, while a car is about 19 percent efficient.
What is KPP?
After getting its electricity from Westar Energy for 25 years, the council chose not to renew its contract with the company about two years ago, opting instead to sign a short-term agreement with KPP.
Formed in 2005 with only four member cities, KPP has grown to 42 member cities. The purpose of the pool is to create a larger bargaining agent for purchasing wholesale electricity for its members.
Holloway said as a KPP member, the city has a diverse energy mix. Resources include modern coal units, a combined cycle plant at Dogwood and hydro power from northern Arkansas and Oklahoma.
“We also have a contract for all the output of the 12.5 megawatt wind farm at Greensburg,” he said. “We also take all the output from Bowersock Dam in downtown Lawrence, which is the only hydro power plant in Kansas.”
In addition to these resources, Holloway said KPP looks for market opportunities to buy power short-term via electrical transmission lines.
Drastic changes coming
Holloway said in the next two years the electric market is going to change dramatically in this region.
“The Southwest Power Pool consisting of Kansas, Nebraska, parts of Missouri, Oklahoma, Arkansas and Texas are forming what they call an integrated marketplace so there will actually be real spot prices on the market,” he said.
At the start, KPP included the cities of Kingman, Attica, Holyrood, Lucas and Greensburg, along with transmission paths associated with them.
“One of the first things we did was to get the electric transmission rights to link it all together,” he said. “Those will probably convert, allowing us to be able to buy power when it is very cheap—that is our hope—as the market progresses.
“Hopefully, we will have free hauling from the transmission we have.”
Holloway said U.S. Department of Energy predicted in its annual report that the price of natural gas is supposed to be about $5 or less for 1 million Btu. A British thermal unit is about the amount of energy needed to heat one pound of water.
This price is predicted to stay around $5 through 2020 in today’s dollars, he said.
Holloway said the difference between 2008 and 2011 is that gas was about $4 a gallon both years and natural gas was $14 for 1 million Btu.
Looking to the future
Councilor Bill Holdeman asked what happens if something goes “haywire” with KPP under the 20-year plan.
Holloway said KPP has no impact under Kansas statutes and therefore cannot affect the city’s bottom line.
“If something goes wrong with KPP, and at the end of 20 years everyone decides to leave, everyone owns part of a power plant and could turn around and sell it,” he said.
In other business, the council:
• learned that Bryson E. Mills, 75, died Jan. 19. He served as the municipal court judge in Marion from 1996 until October 2011.
• discussed needed repairs to the city’s street sweeper. Doug Kjellin, city administrator, said a new street sweeper is budgeted for 2014 as part of the five-year capital outlay plan. Mayor Mary Olson said she wanted to talk more about this at the next meeting because something else may have more priority.
• heard from Tyler Mermis, who started work as police chief Jan. 23 after succeeding Josh Whitwell.
“I am excited you appointed me to this position,” he said, “and I am not going to let you down.”
• signed the authorization loan agreement between the Kansas Department of Health and Environment and the city for the Jex Addition wastewater treatment project for $433,000.
The city’s grant writer, Rosemary Saunders of Ranson Financial in Wichita, said it is a 20-year agreement with the first payment due March 1, 2013. The interest rate is 2.42 percent.
• learned Friday, Jan. 13 was a lucky day for the city. Harvey Saunders reported a grant was awarded to go toward the Jex Addition project through the Kansas Department of Commerce.
• learned city crews completed the removal of trees on the north end of the drainage levy. Kjellin said the next task is working on riffraff underneath the south railroad bridge.
“We are almost to the point where the levy will meet the Army Corps of Engineer’s requirements,” he said.
• was reminded about the noon Jan. 24 deadline for filing for local office. City Clerk Angela Lange said four applications for two council positions had been received so far.
• welcomed Boy Scout Troop 102 to the meeting.
The next meeting will be at 4:30 p.m. Feb. 6 at Marion City Hall.