Upcoming public meetings: Berea wholesale electric power decision

Berea Municipal Utilities (BMU) does not generate its own electricity. It buys its wholesale electric power from Kentucky Utilities (KU). KU provided Berea and ten other cities with new terms for contract renewals that were considered too restrictive. Consultants who have negotiated with KU on behalf of this coalition of cities for more than 30 years advised that the cities should evaluate options besides continuing with KU. This led to an expansion of this long-term city collaboration to create a new agency so that this collective could formally negotiate power contracts for the groups and spread administrative costs among the group. This agency is the Kentucky Municipal Energy Agency (KyMEA). It was assumed that Berea would sign on to participate, but various issues prompted Berea’s city council to explore other options in addition to either continuing with KU, going with KyMEA, or going with some other provider. The city council is now in the process of considering options before it makes a choice. 

Important Dates

A meeting for public input, originally planned for February 24, has been postponed to allow more meetings among city council members, consultants and representatives of various wholesale electric power providers. These are open meetings, so the public is welcome to attend. Public comments will not be invited. However, attending these meetings will give you better context for making comments when the public meeting occurs. These dates, all on Wednesdays at 5 p.m., are established:

• February 24 – Representative from KU
• March 2 – Representatives from KyMEA
• Date to be named – Representatives of others providers that offered top bids

Outcomes of Q&A with Consultants

On February 17 the city council met with the consultants to clarify a range of questions and respond to rumors that have been passed to council members. It appears that the decision has come down to either staying with KU, or going with KyMEA. One council member has forcefully advocated that the city stay with KU despite other choices that are less costly, less risky and more flexible. It is unclear the extent to which rumors have resulted from this council member, communications to that member from KU, or from some other source.

Rumor: The city’s consultants either can’t be trusted, or don’t know what they’re doing.

Fact: The consultants have decades of experience navigating one of the most complex industries in existence. One has been serving the coalition of cities since the early ‘80s when the utility belonged to Berea College.

Rumor: Cities are leaving KyMEA left and right.

Fact: Berea is the only city that has left. In fact, additional cities are considering becoming a part of the coalition. Remember, this is just an extension and formalization of more than 30 years of collaboration among the eleven cities.

Rumor: KU is the only option that didn’t have a bunch of hidden costs.

Fact: The consultants have decades of experience in balancing various power supplier bids. The numbers they provided to city council were “levelized” numbers taking into account all the various costs in order for the council to have an “apples to apples” comparison.

Rumor: If we had an emergency like another ice storm, we wouldn’t get the same support from KU’s line maintenance crews.

Fact: One consultant said that very question had come up with another KyMEA member city. KU’s line maintenance subsidiary said that they have a great, long-term relationship with each city and want to continue to serve them as in the past.

KU’s proposal is about $10,000,000 dollars higher than the lowest viable proposal. KU primary power source is coal, which makes up about 87% of its power. Only 17% of its coal comes from eastern Kentucky. The majority is imported from out of state. The city would have to go it alone without the strength in numbers of the coalition and would have to foot the total bill to renegotiate contracts with KU. KU has also been less than supportive of energy efficiency and renewable energy options that cities might want to pursue.

KyMEA is in the process of building a portfolio of contracts, of varying time periods with various power providers and using a variety of fuels. They have access to power markets that include wind coming from the north and hydro coming from the south. Member cities are very interested in making renewables a part of the portfolio. This builds in flexibility and minimizes the risks of having all your energy eggs in one basket. KyMEA is also looking at ways it can support energy efficiency initiatives among its members.

BEES originally opposed a plan by KyMEA to buy power from Owensboro’s very old, inefficient coal plant. In parallel with our concerns about the Owensboro deal, other KyMEA members also decided that a contract for Owensboro’s power was not a wise choice. That provides an example of another strength of going with KyMEA: Each city-member has a voice in the choice of power options. With KU, it is the voice of shareholders that carries the most influence. Given that KU is an investor-owned corporation, its charges include a guaranteed return on equity and they pay taxes on earnings. KyMEA would have no shareholders expecting profits and as a municipal agency would pay no taxes. With the Owensboro issue out of the way we favor serious consideration of Berea rejoining the collective that is KyMEA.