March 15, 2021 Commission Minutes
GOODLAND CITY COMMISSION
March 15, 2021 5:00 P.M.
Mayor John Garcia called the meeting to order with Vice-Mayor Jay Dee Brumbaugh (via telephone), Commissioner Aaron Thompson, Commissioner J. J. Howard and Commissioner Gary Farris responding to roll call.
Also present were Dustin Bedore – Director of Electric Utilities, Frank Hayes – Chief of Police, Neal Thornburg – Director of Water and Wastewater, Danny Krayca – Director of Parks and Mary Volk – City Clerk.
Mayor Garcia led Pledge of Allegiance
Approval of Agenda – ON A MOTION by Commissioner Howard to approve Agenda as presented seconded by Commissioner Farris. MOTION carried on a VOTE of 5-0.
PRESENTATIONS & PROCLAMATIONS
- Goodland Gary Day – Mayor Garcia proclaimed April 1, 2021 as Goodland Gary Day in the City of Goodland by reading and signing proclamation.
- Sunflower Electric & Prairie Land Electric – Cory Linville, Sunflower Electric, Vice President of Power Supply and Delivery stated, we are here to summarize what happened during the cold weather event last month and what we did to prepare for event. Sunflower Electric is a generation and transmission cooperative, wholly owned by six distribution properties. Prairie Land is one of the cooperatives. Kirk Girard, Prairie Land CEO is here if you have questions. We also have Erica Villarreal, Manager of Power Contracts from Sunflower Electric. Map shows the Southwest Power Pool (SPP) region. The SPP is a regional transmission organization where all power suppliers are members of SPP, who provides transmission service, transmission planning and wholesale market energy. The entire SPP area experienced this severe cold weather event and regional impacts of event were felt by everyone in the pool. SPP is a balancing authority for the entire region and with that responsibility they are responsible for matching generation to the demand for the entire region. Electricity is an instantaneous product where there has to be a constant match of generation to the usage by all users. In addition, they have to maintain adequate reserves to generate instantaneously. If a generator goes offline or there is a large swing it has to be accounted for, so SPP has to have energy to meet demand plus capacity for tendencies that may occur. SPP has to balance energy with all entities in region and understand what their load forecast is with generation available to serve that load. SPP coordinates with transmission operators to ensure demand and reserve requirements are balanced with generation. On February 9th SPP identified there was cold weather forecasted for region. Generators and operators started to take a more conservative approach to operation and defer anything that will put a unit at risk so that generation is available for cold weather. On February 14th SPP saw the following week there would be a potential capacity and energy shortfall so made a request to all members for conservation of energy. On February 15th SPP entered into an Energy Emergency Alert (EEA). Under EEA we recognize there is a lack of generation for load requirements. There are three levels of EEA, with increasing severity as levels increase. Under EEA1 all generation was committed and there is concern of not being able to meet reserve requirements. During the period of February 15th through 19th, SPP was in a Level 1 for almost thirty nine hours. EEA2 is the next level of emergency and during this period of time SPP remained at EEA2 for forty three hours and twenty minutes. EEA3 is highest level of emergency and is the period when SPP does not have adequate reserves. SPP was at this level for nine hours and seven minutes. For the first time in history, SPP was directed to curtail loads. As a transmission operator we were one of the entities directed to shed a percentage of our load. On February 15th, total SPP load shed was 610 MW for one hour and seven minutes. Sunflower’s pro-rata portion of load shed 14 MW. All operator transmissions across the region were part of the load shed. The next morning, SPP issued an EEA3 again and shed 1,359 MW, where Sunflower’s portion was 30 MW. Then 20 minutes later they increased load shed to 2,718 MW, with Sunflower’s portion being 60 MW for two hours and twenty two minutes. That was four times the amount we were trained for and we did our best to rotate circuits to minimize time any location is out of power. Most of our customers were not out longer than an hour; however, because of the magnitude of the load shed a few were out longer. The important thing is we maintained your liability following the load shed directive and larger outages were averted. Mayor Garcia asked, when you elude to the fact there was a lack of generation resources to serve the region, that included all entities in SPP. Was that attributed to the fact there was not enough combination of natural gas, wind or nuclear power to serve region? Cory stated, that is accurate. Everyday SPP looks at all generation for region and identifies load to pick cheapest resources to serve load. In this instance there was not enough generation to serve the load. There was a function of low supply because of generation unavailability due to lack of fuel supply and high demand of energy. A big enough area was impacted that we could not import from pools in neighboring regions. Year to date wind supplied 31 % of energy but during this event is was about 10%. The gap was primarily made up of coal and gas which were both challenged with weather elements. As the supply of natural gas dropped off and demand for power increased, prices for natural gas sky rocketed. Typically this time of year gas prices are $2.50 per MMBTU, but it rose to $1,000 during this event. Market Energy prices we pay for energy also sky rocketed. Natural gas prices play a big part in cost for power. Market energy prices this year are about $20.00 but during event prices got as high as $4,000. This was an extreme economic impact. Sunflower tries to protect themselves from this type of event. Since 2014, the highest price was $100 MWH, but during this event it was at $4,000 MWH. To hedge Sunflower looks at the disputable capacity from our coal fired generator because the price of coal is very steady, unlike natural gas. We can be assured that we can get energy from our coal fired plant for about $20 MWH. Whenever that dispatchable capacity is Holcomb we know the power supply will be capped at this cost. We also have fixed price energy with renewable energy purchased power agreements, so with this energy resource we know what the price will be. Sunflower predicts the amount of energy we are going to get from coal and renewable resources and try to maintain that percent for the following twelve months. For February, March and April we anticipated 90% hedge from coal and renewable energy. During this event coal performed well but wind and solar were not available as anticipated which impacted our hedging. During the event, Holcomb was on line which reduced our exposure by about 70%, reducing our exposure to the $4,000 MWH power. Unfortunately we did not have a lot of wind to help out. Power supply is cost versus risk balance. When you choose a power supplier, you will get a certain amount of resources. Typically the higher the cost for capacity, the lower the price for the energy. KMEA provides power to several municipalities in area. KMEA procures chunks of resources to hedge its cities against the energy market price to meet requirements. The cities can structure their portfolio according to their cost-risk tolerance. With Sunflower hedged at 70% with Holcomb, KMEA municipalities were exposed. Market price of energy follows cost of gas. Sunflower’s estimated costs during event was $28 MWH. Holcomb’s hedge during this event was advantageous to Sunflower. Goodland’s energy consumption in February was 4,487,883 KWH at $.284 KWH which equates to $1,274,000 in incremental costs. When looking at a public power supply, have to look at cost and the hedging ability. Calculating Sunflower’s energy cost adjustment (ECA), we identify the variable cost of energy including fuel costs, purchase power agreements and settlements in the SPP integrated marketplace. January was a normal month. To calculate ECA, Sunflower buys the energy needed to serve our load at the beginning of the month from SPP integrated marketplace. We sell our resources into the market based on their production costs and revenues received from that offset the cost of energy. When costs are higher than what we can sell energy, it bumps the ECA. February market costs to serve Sunflower’s load was almost $600 MWH. The magnitude of that price was $194 for 325,099 MWH and costs for previous twenty seven months to serve 10,443,297 MWH was $195. Holcomb was important in keeping costs relatively under control. Holcomb margins of $116 were used to offset and save on costs. Do anticipate we may receive some additional make whole credits in next few months which will be credited back to customers. Mayor Garcia asked, how many days did arctic wave last? Cory stated, the cold temperatures started the 10th and 11th but the coldest temperatures were the 14th through 19th. By the 20th it warmed up enough that prices returned to normal so no need to remain on emergency. Mayor Garcia asked, how long did Holcomb generate? Cory stated, we began running right before the event and ran until end of month. Mayor Garcia asked, you say your production costs were $22 MWH? Cory stated, our production costs are in the $20 to $22 MWH range. Mayor Garcia asked, what was the open market price at that time? Cory stated, we buy all our power from integrated marketplace but sold from Holcomb about 70% of our energy requirements. So 70% of our load cost us $22 MWH and 30% cost us about $2,000. Vice-Mayor Brumbaugh stated, I do not like the fact we depend on whether the wind blows, ice freezes on the blades or hedging but I feel like we got a good deal with the bill we received. Commissioner Howard stated, this shows we cannot be 100% green, we need fossil fuel. Cory stated, FERC and NERC are opening investigations for both the natural gas and electric side of business to see what can be done to prevent this event in the future. Sunflower is looking at hedging capabilities for future, but it is just like insurance, the more you protect yourself the more expensive it becomes. FERC will be having some future regulations from this event. We are looking at what can make it better. Texas was worse off than us. Part of the investigation is where did all the money go and should prices have really been that high. Commissioner Thompson stated, many factors that happened were out of Sunflower’s control. My concern is Goodland and our ability to create our own power and not pulling on grid. How can contract be renegotiated for future? Cory stated, there is discretion to be had as to how you can offset costs from current contract. We can discuss options if you want to renegotiate the contract. Vice-Mayor Brumbaugh asked, how many municipalities have a contract like ours and get credits for generating? Cory stated, all municipal contracts are the same as Goodland’s where we can call on you to generate. Commissioner Farris stated, the chance of this occurring again is slim. Cory stated, we hope so, but do not know for sure. Since 2014, the highest market prices SPP has seen were $100 MWH, during this event they were $4,000. Mayor Garcia asked, explain how Open Access Transmission Tariff (OATT) works? Cory stated, OATT is the tariff that governs how SPP provides transmission service to the network. It includes how you procure service, identifies how costs of transmission service are calculated and allocated to customers and how transmission planning process should work. Advantage of regionalized planning is to coordinate more efficient transmission service. The tariff also identifies protocols associated with wholesale energy market along with a variety of other things. The main things it provides is how SPP provides transmission service, how costs are determined and how costs are allocated. Recently Sunflower has been heavily involved to develop a better and fairer way to allocate costs with transmission upgrades from wind energy. Mayor Garcia stated, in the SPP there are other agencies that offer the product Sunflower does. The diversity in their contract language allows municipalities to buy cheaper power at any time from other sources without penalties. In the language in Sunflower’s contract, is that a provision we can incorporate? Cory stated, you get access to the low price on energy but you also get a cap when prices go higher. Mayor Garcia stated, it has been conveyed to the commission you are entertaining possibility of extending contract five years and are willing to disregard these extraordinary costs. Cory stated, we have extension options that have a reduction in contract prices. The costs assessed would reduce the contract for a savings. Mayor Garcia stated, our contract is in effect until December 31, 2026 then we operate on a year to year basis until we determine what we want to do. What is termination notice needed on contract? Cory stated, a year but we can renegotiate sooner if you would like. Mayor Garcia stated, section 5.6 of the contract discusses addition and deletion of credited generation capacity with one year written notice to Sunflower. What is that and how would we know a year in advance what markets are doing? Cory stated, Sunflower buys your capacity, which is creditable power; we have to have creditable power plus 12 % for customer. We pay you for the capacity. If you have planned retirement of an asset we have to be notified to take that generation out of our plan to ensure capacity claimed is there to meet peak load. Mayor Garcia stated, we were charged $9.85 for demand all months except during summer, you charge $14.07? Cory stated, that is the demand portion and non-summer months are charged lower then summer months when the demand is higher. It is designed to set lower demand during peak months. Mayor Garcia stated, in 2012 the City no longer bought from Sunflower but Prairie Land was added to agreement for us to buy power? Cory stated, their power supply comes from Sunflower. Mayor Garcia stated, from 2012 the adder fee has increased, how do you bill Goodland? Kirk stated, at the time they built the MWH rate plus adder, the adder stayed at the coop level because the coop and Goodland became members of Prairie Land. Going through Sunflower we assume a portion of the risk. I understood at time the adder was added, Goodland became a member of Prairie Land. When your contract ends we still have the risk of the load. Cory stated, prior to 2012, there was an adder in your Sunflower contract, this is just more transparent to see costs. Mayor Garcia stated, I believe the Commission would entertain a proposal from Sunflower and recommend you high light ways that are equitable for City as well as Sunflower. In order to make decisions that best serves our customer’s you need to understand the contract has to be just as equitable for the City. Commissioner Thompson stated, I am open for conversation. Kirk stated, I have talked to Alan about renegotiating, he did not want to rush it.
- 03/01/21 Commission Meeting Minutes
- 03/08/21 Special Commission Meeting Minutes
- Appropriation Ordinances: 2021-06, 2021-06A, and 2021-P06
ON A MOTION by Commissioner Thompson to approve Consent Agenda seconded by Commissioner Howard. MOTION carried on a VOTE of 5-0.
ORDINANCES AND RESOLUTIONS
- Ordinance 1738: Extraordinary Power Costs – Mayor Garcia stated, the Commission received information from the City Manager showing customer type and percentage breakdown by type reflecting proposal approved by Commission. If we leave ordinance as approved, residential customers are paying 7.9% generating $207.552 per year, small commercial is 5.70% with $53,760 and large commercial are 1.1% for $23,400. Total estimated revenue generated per year is $284,712 to extend over four years. Commissioner Thompson stated, I still am in favor of $8 across the board. The individual break down shows more of an impact. Working off the estimates, this would require forty nine months to pay off extraordinary costs. The cost for residential is $384, small commercial is $320 and large commercial is $1,440, which is a substantial increase. The College has twenty four meters so their additional cost over four years is $20,000. If we charge $8 for all customers, it is less than $12,000 for the College and extends term five months. This is a large cost; are we trying to split up as evenly as we can across the community or are we trying to base it on small and large commercial customer’s with higher rates because they have more consumption. Some residential homes use more than some small businesses. We are playing a balancing game on how costs should be spread out. Mayor Garcia stated, at this point we do not know our total costs. It is hard to make a decision on how to diversify costs. When will we know where the impact of our load is? Dustin stated, residential is the bulk of our power. Commissioner Farris stated, businesses should pay more because charged less per KWH. Dustin stated, we tried to make as simple as we could and felt people could absorb this additional cost amount. Your largest user has one meter where the college has twenty four meters. Commissioner Howard stated, my business uses less than my residence. Vice-Mayor Brumbaugh stated, I do not feel we have enough information at this time. I feel need to table until we get more information on usage. Mayor Garcia stated, I am in favor of tabling item. Commissioner Thompson asked, how deep do you want to dig into usage? We need to set up time to look into numbers. Mayor Garcia asked, the fee has to be set by April 1, when new billing cycle begins. Mary stated, the ordinance has to be approved and published before April 1 to be on next bill. Consensus of Commission is to table item until receive more information.
- IFB 2021-02 Bid Award – Mayor Garcia stated, I am comfortable with staff recommendation to accept the bid from Dan Brenner Ford. ON A MOTION by Commissioner Farris to approve the bid from Dan Brenner Ford in the amount of $30,020 seconded by Commissioner Thompson. MOTION carried on a VOTE of 5-0.
- City Manager – Absent, No Report.
- City Commissioners
Commissioner Thompson – 1. No Report
Vice-Mayor Brumbaugh – 1. No Report
Commissioner Howard – 1. Thank you to the employees for your hard work.
Commissioner Farris – 1. No Report
- Mayor – 1. No Report
ADJOURNMENT WAS HAD ON A MOTION BY Commissioner Thompson seconded by Commissioner Farris. Motion carried by unanimous VOTE, meeting adjourned at 6:20 p.m. Next regular Commission meeting is scheduled for April 5, 2021.
ATTEST: John Garcia, Mayor
Mary P. Volk, City Clerk