FAQ: Public Power for Pittsburg

Why is the City exploring public power now?

 

For several reasons.

  • The electric industry has changed. The cost of natural gas and renewable energy is now competitive with coal and nuclear. This provides an opportunity for the City to choose the best-qualified power supplier with the best rates
  • 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 inquiries 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

 

What is a franchise agreement?

 

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.

 

Can the City afford to purchase a public power utility?

 

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.

 

How would this affect my electricity bill?

 

Our goal is to provide less expensive rates and reliable electricity for all residents and businesses in our community. With a public power utility, Pittsburg residents will pay less for their electricity. 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.

 

What will the City do with revenue from the public power utility?

 

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

 

Does the City know how to create and run a public power utility?

 

The City’s goal is to have the best electric utility in the state of Kansas in terms of quality, reliability, and cost.

Firstly, we will follow the example of the 2,000 communities across the U.S. who already successfully provide public power to more than 49 million Americans. 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.

We have a team of energy consultants on board who will establish Pittsburg’s public power utility according to industry best practices. Experienced, knowledgeable professionals who are paid market-rate salaries will then operate our public power. This includes skilled linemen, electrical engineers, electrical technicians, and a management team who are experts in the electric industry.

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.

 

Will the City be able to deal with a major electricity outage?

 

Yes. Delivering safe, reliable electricity is a top priority. A Pittsburg public power utility will deal with major power outages in exactly the same way Evergy does today. An experienced response team will provide support and resources to manage the outage, and they will be on hand 24/7/365 to get our power back up and running as quickly as possible.

All electric utilities, including Evergy and including public power utilities, have structured mutual aid contracts in place in the event of a more serious natural disaster. This means that the state government and municipalities across the country will provide any extra aid we may need. These contracts would be put in place by a team of energy experts familiar with these country-wide operations.

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.

The reality is that Pittsburg residents won’t notice a change in how major power outages or natural disasters are handled. They can be confident it will be dealt with quickly, efficiently, and effectively.

 

How will a public power utility improve Pittsburg’s economic development?

 

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.

 

Have other cities created their own public power utilities?

 

Yes, and plenty of them! There are 118 cities in Kansas alone that own a public power utility. Across the country, there are 2,020 public power utilities that successfully serve around 49 million people. Other cities are transitioning to public power right now, including Boulder, CO and Pueblo, CO.

 

Will the City have to purchase electricity from Westar (Evergy)?

 

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.

 

Does that mean the City can purchase electricity from renewable energy sources?

 

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.

 

How long will the City’s analysis of public power take?

 

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.

 

How much will the City’s analysis of public power cost?

 

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.

 

I live outside the City limits. How will this impact me?

 

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.

 

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