Monett City Council votes to form power pool
Empire offer bypassed for greater potential savings
The Monett City Council has authorized forming a pool of cities through the Missouri Joint Municipal Electric Utility Commission (MJMUC) to buy wholesale electricity off the market, rather than buying exclusively from Empire District Electric Company.
The vote on Monday followed three years of discussions and several months of detailed talks between the city and Empire, which led to a counter-proposal earlier this month.
Prior to the vote, Monett City Administrator Dennis Pyle reviewed details leading up to the decision. Deregulation of the electricity industry by the Federal Energy Regulatory Commission in 1996 led to the formation of the Southwest Power Pool (SPP), which oversees the electric grid, ensuring the reliable supply of power, adequate transmission infrastructure and competitive wholesale electricity prices for a 14-state region.
“On March 1, 2014, the SPP launched the Integrated Marketplace (IM),” Pyle said. “The IM coordinates next-day generation across the region to maximize cost-effectiveness and to provide participants with greater access to energy and to balance supply and demand and facilitate the integration of renewable resources.
“These developments have been successful in creating a competitive energy market within our region and provides opportunities for utilities like the City of Monett to seek the most cost efficient power supplies.”
The four cities that buy electricity wholesale from Empire, Monett, Mt. Vernon, Lockwood and Chetopa, Kan., held their first joint meeting on Feb, 2, 2015, to discuss forming their own pool to buy electricity from the energy market once the current contracts with Empire expires in 2020. The group, informally calling itself the Empire Cities Power Pool, met periodically in 2015 and 2016, and even reached out to Nixa and Carthage, which sent representatives to meetings.
The Missouri Public Utility Alliance (MPUA) joined the discussion at the cities’ request to explore the feasibility of forming an independent pool. The MPUA manages two pools already: MoPEP, which owns power generating capacity, and MMMPEP, which exclusively buys power off the marketplace. The cities had the option of joining either pool, or sticking with Empire or forming its own pool.
“After additional meetings, in February, our group decided to engage MPUA to provide an Integrated Resource Plan specifically for our four cities which would identify what type of resources and what quantities would best fit our pool’s needs with the intent of pursuing the final option of forming our own energy pool,” Pyle said. “The study, projecting needs from June 1, 2020 to Dec. 31, 2040, recommended a diversified resource portfolio that would be represented in the form of separate purchase power agreements. In addition to capacity and energy needs, the Southwest Power Pool reserve requirements were included.
“After all of these discussions, the preference among the pool cities was to form a new pool that can leverage current market conditions through purchase power agreements over the ownership of power production assets to serve the pool’s total obligations. A rounded, industry-standard portfolio was recommended which is a blend of base load, intermediate and peaking resources from differing fuel types.”
The Monett council introduced an ordinance on Sept. 20 calling for formation of the pool. Empire representatives asked the city to hold off on its action to give time for the company to submit a counter proposal. Representatives from Monett and Mt. Vernon met with Empire officials on Nov. 10, then the Monett council members met in a work session on Nov. 13.
Empire officials discussed risks perceived in forming a separate power pool and the benefits offered by the company in working with the client communities. According to Pyle, Empire saw the cities exposed to a cost-based rate tariff and three to five separate resource agreements, compared to dealing with one supplier. Moreover, Empire identified risks in deliverability, limited generation backup and transmission congestion issues.
“Empire offered the following value-added benefits: electric car charging stations; the possibility of a community solar garden; customer, communication assistance; increased access to green energy; continued long-term operational support; and increased strategic partnership in resource planning,” Pyle said. “Empire offered a 6 percent discount from the existing [government facilities regulation] tariff with a 10-year option to extend the contract to 2030. The projected savings to Monett with the 6 percent discount was estimated at $856,000 per year.”
Pyle said the offer was weighed and he recommended moving forward with the power pool in partnership with the city of Mt. Vernon. The other cities each represented only 4 megawatts of power on a peak daily energy load, compared to 50 for Monett and 27 for Mt. Vernon. Those cities could join later, but were not in a position to join the pool at this time.
Pyle identified three key reasons for the recommendation.
“We believe, according to information provided by MPUA, that the cost savings realized from the market will be greater than the 6 percent reduction offered by Empire, with a potential of much greater savings,” he said.