SEK cities looking for ways to cover extremely large energy bills
City of Altamont faces a million dollar bill for electricity and gas following skyrocketing prices during winter storm.
ALTAMONT, Kan. – Cities in southeast Kansas are trying to find ways to pay utility bills that are hundreds of thousands of dollars higher than they normally are.
Last week, we told you how officials in Altamont were trying to avoid a crisis — as natural gas prices skyrocketed during the winter storm.
You can read more about that here: https://www.koamnewsnow.com/southeast-kansas-city-working-to-avoid-gas-crisis-as-prices-skyrocket/
Altamont saw natural gas prices as high as $622 per MMbtu. The normal price is closer to $3 per MMbtu.
Now that the temperatures have increased, officials with the city say the prices have gone back down. But they aren’t out of the woods yet because they’re about to get hit with massive utility bills.
“They’re estimating our financial impact for both electric and gas to be about a million dollars,” says Altamont City Administrator Audree Aguilera.
That price includes only the usage from the month of February, and breaks down to $200 thousand for electricity and $800 thousand for natural gas. The city’s normal budget for natural gas for an entire year is just over $500 thousand dollars. Normally the price for gas and electricity for a month is around $40 thousand altogether.
“We have the capitol to cover that $200 thousand bill. We might have to do an inter-fund loan, where we just borrow from another fund and pay that fund back. We just… $800 thousand, that one we don’t. That one would drain pretty much all of our funds,” explains Aguilera.
And Altamont isn’t the only southeast Kansas city in this dire situation.
According to the Iola Register, the City of Humbolt, Kansas has declared an “extraordinary financial emergency.” The Register reports the city’s gas bill could total close to a million, when their annual gas budget is only $375 thousand. That could mean an 80 percent increase in per unit usage charges for residents.
Officials in Altamont are currently discussing what they can do to lessen the financial impacts that their residents will feel. But at the time we spoke to Aguilera on Thursday morning a plan was not yet set in stone. She says the Altamont City Council plans to discuss options at a Thursday evening city council meeting.
“In that case where it’s passed down to the consumer, I don’t want monthly bills increased any more than like 50, 60 dollars. I know that’s gonna be hard on some people even 50 dollars,” says Aguilera. “But it’ll have to be spread out over several years. Probably six or seven.”
The city hopes there will be some kind of state or federal relief to help cities struggling with the massive bills.
Sam Mills with the Kansas Municipal Energy Agency, the co-op that both Altamont and Humbolt purchase gas and electricity from, says they want to see the same.
“We’re hoping for some kind of assistance, whether it be short term or long term. But the immediate impact is we need to mitigate the costs to the cities of this huge burden,” says Mills. “These cities are struggling anyway with reduced sales tax and reduced business and so forth because of the pandemic. This couldn’t have hit at a worse time.”
Mills explains the prices came as a huge shock to KMEA.
“Two weeks ago tomorrow we bought gas for the weekend. The markets aren’t open on the weekend, so we had to buy gas for Saturday, Sunday and Monday. That’s normal. And then it was a holiday, Presidents Day, so the markets weren’t open on Monday. So we ended up buying four days worth of gas. Late in the day (on Friday) we heard rumblings that the gas prices were going to post extremely high. When we learned of the posting of over 350 dollars per MMbtu, that was devastating,” explains Mills. “We immediately went to work with our legal team in both Washington and Topeka to get a plan in place.”
Mills says KMEA was forced to purchase natural gas at the high rates, or they would have faced huge penalties that would be passed down to municipalities for imbalances on the gas pipeline. The immediate response was to encourage cities to reduce their usage, and encourage cities to use natural gas from their reserves. Natural gas in reserves was purchased at a low rate during the summer of last year.
Now KMEA’s attorneys are currently at work in both Topeka and Washington, trying to find a solution for cities that are facing record breaking high bills, says Mills.
“That effort has been met with a lot of empathy. I know there are a number of cities have declared a financial emergency, and many counties have as well. That leads to the Governor declaring a financial disaster, which my understanding is she has done. And that is necessary for the Biden administration to declare a national disaster to mobilize FEMA, and give us any help they can,” says Mills.
KMEA has also joined the American Public Gas Association and other municipal utilities in the Midwest to push the Federal Energy Regulatory Commission and the U.S. Department of Energy to conduct investigations into the price increases during the winter storm.
On Monday, the Federal Energy Regulatory Commission announced an investigation to see if markets were manipulated.
You can read that release here: https://www.ferc.gov/news-events/news/ferc-examine-potential-wrongdoing-markets-during-recent-cold-snap
“We hope, or our thought is, it was due to the reduced production and reduced volumes, reduced pressure on the gas lines. But we don’t know,” says Mills.
Once the City of Altamont has a plan set in stone, Aguilera plans to share the details on the city’s Facebook page.