KPP executive explains factors affecting energy costs for cities

Janet Marler, Marion City Library director, was recognized at the Jan. 5 council meeting for 25 years of service. Mayor Todd Heitschmidt presented Marler with a distinguished service certificate for her dedication and commitment. In his presentation, Heitschmidt proclaimed Jan. 9 as ?Janet Marler Day.? Patty Decker / Free Press
Janet Marler, Marion City Library director, was recognized at the Jan. 5 council meeting for 25 years of service. Mayor Todd Heitschmidt presented Marler with a distinguished service certificate for her dedication and commitment. In his presentation, Heitschmidt proclaimed Jan. 9 as ?Janet Marler Day.? Patty Decker / Free Press
The Marion City Council at its Jan. 5 meeting heard from Mark Chesney, CEO and general manager of the Kansas Power Pool, which provides energy to Marion, Hillsboro and other member cities.

Chesney said he was meeting with all KPP member cities offering updates and listening to any concerns or suggestions.

?I realize not everyone in the community understands the joint action agency you belong as a member is a municipal energy agency, meaning our cost of service is not-for-profit,? he said.

Mayor Todd Heitschmidt asked Chesney if he had any insight into energy prices next year.

Chesney said the KPP worked with Southwest Power Pool, a regional transmission provider with presence in eight states, and came away with a good feeling about its costs.

?In late October, (SPP) announced a 6.7 percent increase over the 2014 actual cost (for energy), and about 22 percent was an increase in transmission costs,? he said.

Regarding future transmission costs, Chesney said nearly $7 billion will be used for transmission infrastructure investments by Westar Energy planned between now and 2022.

?This $7 billion infrastructure investment is something you and I will pay for and it will go on for a long time,? he said.

About 13 to 14 months ago, Chesney added, KPP didn?t realize the extent of the transmission cost increase that was needed, and while it wasn?t the only component, it was a principle component that was underestimated.

Consequently, KPP had energy costs that were significant, and all the member cities felt that increase, he said.

Predicting future costs

?We have a much better ability to forecast those costs now and the increases are part of the rate, which was about a 3.5 percent increase over 2014 actually,? he said.

?KPP is trying hard to put a finger on the pulse of what energy is doing.?

Natural gas prices were at $2.90 a dekatherm, which is a unit of energy, but he said he thinks it will be going back up to $4 plus soon.

Chesney said he doesn?t know anyone who enjoys paying an electric bill, but that KPP gathers the best data it can to forecast costs in advance.

?How do you forecast demand for electricity a year in adance on every single hour of the year?? he asked.

?Everything in this industry is a moving target. There are escalations and course corrections and (all of us) feel it when we pay electric bills.?

Mike Regnier, fire chief, was honored at the Marion City Council meeting Jan. 9 for his 40 years of service to the fire department and emergency medical support efforts. Recognizing his dedication, Jan. 16 was proclaimed ?Mike Regnier Day.? Patty Decker / Free Press
Mike Regnier, fire chief, was honored at the Marion City Council meeting Jan. 9 for his 40 years of service to the fire department and emergency medical support efforts. Recognizing his dedication, Jan. 16 was proclaimed ?Mike Regnier Day.? Patty Decker / Free Press
Councilor Jerry Kline inquired about transmission lines and whether new separate ones could be built to minimize KPP?s dependence on Westar Energy.

Chesney explained that while there may have been a time in the industry?s history to do that, it?s not that way anymore.

?The idea that (an energy group) can jump off one line five miles down the road?no that?s not the way it works,? he said.

Utility model

The electric utility model today is that all generators, wherever they are located, have legal access to a transmission line, he said.

Transmission lines are used by power providers, he added, to move energy through and to cities.

An electric generating facility will now bid the cost of its output into the market that is managed by SPP, and SPP will dispatch a generator, presumably on the lease-cost solution.

?It will place a schedule for electricity onto the bulk transmission system,? Chesney said.

?In looking at the aggregate, everybody in (SPP?s) eight-state area has equal access to the entire bulk transmission system.?

Citing an example, Chesney said that if a transmission line is built from western to eastern Oklahoma, everyone in SPP?s regional transmission organization will pay for it.

?That is the regional transmission organizational rules under the Federal Energy Regulatory Commission mandates,? he said.

?That?s how we do things now, and I will leave it to you to decide whether it?s a good idea.?

Chesney said it is a complex discussion and there aren?t any simple yes or no answers.

?We appreciate input from our members and we are trying to be as responsible as we can,? he said.

In other business, the council:

? proclaimed Jan. 9 as Janet Marler Day. Marler was recognized by Heitschmidt and council members for 25 years of service as head librarian in the city.

? proclaimed Jan. 16 as Mike Regnier Day for his 40 years of service as the city?s fire chief. Heitschmidt presented Regnier and Marler with framed proclamations.

? approved waiving the Generally Accepted Accounting Practice procedure.

? approved a request by Marty Fredrickson, public works director, to fill an open position as refuse operator. The council also agreed to lift the hiring freeze which went into effect June 23. The council will continue to approve new position hires or positions not already included in the budget.

? agreed to raise the clothing allowance from $100 to $150 annually for city employees working outside and requiring special items or replacing work boots, blue jeans or other apparel. City Administrator Roger Holter said there is $1,800 in the budget for clothing allowance, but adding the approved amount could be done.

The next city council meeting is at 4:30 p.m. Monday, Jan. 19, in council chambers.