Why is the City exploring public power now?
For several reasons.
- A couple of years ago, we found that the City’s electricity costs were increasing at a rate we could not sustain without increasing taxes
- High electricity rates are a deterrent to businesses looking to locate in Pittsburg – our rates are higher than all our adjoining states
- We have had many enquiries from citizens about frequent rate increases and concern about the overall cost of electricity
- The 20-year franchise agreement with our current electricity supplier expired about four years ago. Since then, we have been on a rolling one-year contract which has given us time to explore all our electricity options. Simply extending this rolling contract year by year is an option, but costs are rising faster than we can raise taxes
Every City has a franchise agreement with electricity providers. This agreement defines the relationship between the City and the provider. For example, it allows the provider to access the City’s right-of-way and defines the terms of service they provide to customers. Franchise agreements are typically long-term.
Yes. Purchasing a public power utility will be paid for with low-interest bonds. No tax dollars will be used to purchase the utility, and there will not be a tax increase to cover the cost of purchase. The City of Pittsburg has excellent financial management, a strong bond rating, sound financials and our reserves are healthy. Additionally, preliminary financial projections indicate that a public power utility would pay for its own purchase price over the course of a 20-year period. While it will cost millions of dollars to acquire the grid and set up the utility, we will still be able to provide cheaper electricity while running the utility and paying off the debt without an impact on City revenues. In fact, a public power utility is expected to generate $3 million in profits in the first year, even with debt service and startup costs.
Your electricity rates will not increase – in fact, it’s likely they will decrease. One of the main reasons we are exploring the option of public power is to minimize increases and stabilize electricity rates for the whole community. Residential customers who get their electricity from public power utilities on average pay 14% less than customers of investor-owned utilities such as our current provider. One change will be that your bill will come from the City of Pittsburg instead of from Westar (Evergy), just like your water bill.
We will use the revenue in several ways:
- To pay utility employees
- To improve reliability by making much-needed improvements to our electricity grid. For example, we will replace poles, put lines underground to minimize damage due to bad weather, update sub-stations, replace transformers, improve tree management and invest in new technology which isolates outages
- To create economic development incentives for businesses to expand and locate in Pittsburg, creating new jobs for our community
- To build up a reserve of funds
The State of Kansas has a long history of providing a path for cities to create their own public power utility. There are State statutes that outline the process for becoming a public power utility, and 118 Kansas cities already own and operate a public power utility. The City has many options for acquiring and operating the electricity service in Pittsburg. Funding can come from multiple sources, support for managing a public power utility can come from multiple sources and we can buy our power from multiple sources. If we create a public power utility, we will initially use experienced electricity professionals to manage the utility until we can transition to a City-managed operation.
Yes. Public power utilities utilize mutual-aid agreements, which allow them to receive help from other communities in the event of a major outage. Mutual aid communities would send linemen, trucks and equipment to help us get the power back on quickly. Electric line contractors are also available in the event of a major outage. We would also be entitled to support from FEMA. Statistically, public power companies respond much more quickly to outages than investor-owned utilities – on average in less than half the time. This makes sense since the employees of locally-owned utilities are taking care of their own system serving their friends and neighbors.
As a City, we currently pay over $30 million a year in electricity costs. This is money that leaves our community. With a public power utility, this money would stay in our community so not only would a public power utility create jobs, but it would invest back into Pittsburg. Public power utilities give back around 5.6% of revenue to the community – approximately $58 billion nationwide. Every dollar of a public power utility employee’s earnings cycles through the community about five times.
Yes, and plenty of them! There are 118 cities in Kansas alone which own a public power utility. Across the country, there are 2,020 public power utilities which successfully serve around 49 million people. Other cities are transitioning to public power right now, including Boulder, CO and Pueblo, CO.
No. By becoming a public power utility, we will have access to the open electricity market. That means we will be able to purchase electricity from any provider so we’ll get the best rates available on the market.
Yes. We will certainly explore using alternative energy sources, as well as providing good incentives for customers who want to start generating their own electricity.
If we gain approval from the Commission to move forward with this analysis, it will be a thorough financial, legal and technical examination into public power. This will ensure that we have all the information we need to make the right decision for the citizens of Pittsburg. It will be a complex project that will take an estimated two to three years to complete.
It is likely to be a 7-figure sum. The cost of this will be covered by existing low-interest bonds, and not tax dollars.
The City of Pittsburg is only a very tiny percent of Westar’s (Evergy) coverage. That means the chance of rates increasing for surrounding communities is very small. The City’s transition process with Westar (Evergy) will be very slow and deliberate.