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Electric

February 2021 Utility Timeline

The following is a to-the-day timeline of the severe weather-related utility price spikes experienced by the City of Osawatomie and the actions taken by staff and the Governing Body. A summarized news release regarding this continually evolving situation can be found here.

Quick Link to Timeline Summary

February 22, 2021Following the record-breaking cold weather and utility crisis that took place in mid-February, staff is notified by the Kansas Municipal Energy Agency (KMEA), an association of city utilities of which we are a member, that they are going to have a large bill and member cities would be moving to a weekly billing cycle the next two weeks instead of the regular monthly billing cycle. The reason for this is that KMEA’s Line of Credit that they could borrow against was $5,000,000 and the bill that they were going to get from Southwest Power Pool was for $9,000,000+; this imbalance meant that members needed to provide payment to the group on a more frequent basis to cover the gap in finances. As part of this temporary change in billing, KMEA provided all their member entities with an estimate and told Osawatomie to expect a bill between $700,000 and $1,000,000 for the total cost over the next two weeks (with the caveat it could go up or it could go down). KMEA said they wouldn’t know the final number for the first week’s payment until Friday (2/26/2021), but that we would need to have funds in the bank ready to be withdrawn by 12:00pm on Tuesday, March 2nd. So we were given notice that we needed to have some portion of $700,000 available by the following Tuesday, only two business days away. At that time, we only had about $500,000 in cash on hand in our Electric Utility Fund. We feared we were early in this financial/energy crisis and at this point there seemed to be a lot of guessing, so we started solving for a $1,000,000 problem, not knowing what it might be, but figuring that would give us some cushion.

February 24, 2021 – We amend our previously scheduled City Council Special Meeting Notice for a Special Meeting to be held on 2/25/2021. The only topic to be discussed is Resolution No. 849 – Declaring a Local State of Financial Emergency Relating to the February 2021 Energy Crisis. This mirrors the Miami County Commissioner’s declaration and the City of Louisburg’s declaration, and got the ball rolling on the State bringing assets to bear and helping with the problem.

February 25, 2021 – Working with our Bond Counsel and Financial Advisor, we identified KSA 10-116a which is a State Statute that allows city utilities to issue No Fund Warrants (borrow money) up to 25% of their annual revenues in a Utility Fund, if there is an extraordinary emergency in that utility. City Council meets in a special meeting and Resolution 849 is passed which then gave staff the ability to borrow up to $900,000 in No Fund Warrants. Remember, at this point we are still solving for what might be a $1,000,000 – we don’t know. That ability to borrow $900,000 and use $100,000 in cash on hand would get us to the $1,000,000.

February 26, 2021 – KMEA contacted the city at 10:57 am with what our first bill would be for the period of 2/10 through 2/16: the amount was $195,531.77. We asked if we could expect a similar amount for the following week, and the answer was probably, yes, but it could go up or go down. We then made an assumption that even if it did go up we could probably use some of our cash on hand to pay, but that we wanted to preserve as much cash as possible not knowing how all of this would eventually play out.

March 1, 2021 – We call for a special meeting for 3/2/2021 with the purpose of considering Resolution 850 – Authorizing the Issuance and Delivery of $400,000 in Principal Amount of No Fund Warrants Series 2021 (Electric Utility System). We arrived at that amount by doubling what our first payment was ($195,531.77), based on estimates received from KMEA. The goal from the beginning is to not borrow more money than we need in order to avoid interest expenses.

Simultaneous to all that was happening internally, we and several other cities/associations engaged the State in the problem. A bill was introduced and we submitted testimony in support of what became SB88, which created the City Utility Low-Interest Loan Program.

Mike Scanlon, City Manager

March 2, 2021 – The first payment of $195,531.77 is withdrawn. We hold another Special Meeting of City Council so the Governing Body can discuss and vote on Resolution 850, which grants us the authority to issue NFW and sell them to First Option Bank. The Resolution is published, becomes law, warrants are issued, and First Option provides us with $400,000 to both replenish and have cash available before our next payment due on 3/9/2021. We negotiated with First Option Bank and they agreed to buy our NFW at 1.2% APR.

March 3, 2021 – At 2:49 pm we receive our second bill from KMEA, totaling $498,163.32 which covered the period of 2/17 through 2/23. This represents what we believe to be our last “spike” billing for the City of Osawatomie, which brings the total in received spike bills to $693,695.09. This bill is due for withdrawal on 3/9/2021, just three business days away.

March 3, 2021 – In Topeka, SB88 is published and becomes law. The bill was introduced in the morning and voted through both the House and the Senate in the same afternoon. Governor Kelly signs it into law that evening. City of Osawatomie and other municipal utilities are eligible to borrow money from the state at .25% (one quarter of one percent).

March 4, 2021 – State Treasure starts promulgating rules and holds a conference call with municipal utilities to provide an update on the what is now called “City Utility Low-Interest Loan Program”

March 5, 2021 – The City Utility Low-Interest Loan Program application portal opens, and applications are accepted until March 15th.

March 11, 2021 – At their regular meeting, City Council passes Resolution 851 (which tells the City Manager to come up with a plan on how to allocate this bill in the future), Resolution 852 (which authorizes the City to apply to the loan program), Ordinance 3794 (authorizing the City to enter into Loan Agreements between the City and State of Kansas, and to use the first proceeds of the loan to repay the $400,000 in No Fund Warrants issued under Resolution 850 on 3/2/2021). Administration has spent the last week preparing the necessary documents for these proposed Resolutions and Ordinances, as well as continuing conversations with other agencies regarding the issue at large.

March 12, 2021 – City staff completes documentation for a loan request of $700,000 – covering the spike bills of $195,531.77 and $498,163.32 (total $693,695.09) plus other minor associated costs.

March 15, 2021 – State Treasurer Lynn Rogers set the deadline for applications at 5:00 pm on Monday (3/15/2021) for a piece of the $100,000,000 loan program, and funding became first-come first-serve for applications received after the deadline. As of Tuesday (3/16/2021) 53 city utilities applied for $69,519,697.04 in loans to cover extraordinary expenses in either electric or natural gas utilities. The portion we applied for ($700,000) was approved for payment, which we received by ACH on 3/17/2021.

March 19, 2021 – The City paid off the NFW at First Option Bank as was specified in Ordinance 3794. At this point the City has a $700,000 loan with the State of Kansas with a current annual interest rate of .25% (one quarter of one percent). This rate is adjustable every January. The loan from the State was 1% below what we offered by First Option Bank, so we took advantage of the lower interest rate.

March 25, 2021At the regular City Council meeting, the City Manager provided a proposed payment framework (seen below) for the City Council to consider, presented as Resolution 857. After much discussion, and with feedback from residents in attendance, Council voted to approve Resolution 857 and a 36-month framework for calculating collection of the spike charges. A final calendar and calculations will be presented at the April 8th meeting for discussion and approval before staff will begin implementing payment options on the mid-April utility bill.

The above is the proposed framework presented to City Council. Administration took samplings from actual consumer bills to create this snapshot of possible utility bill ranges and demonstrated how different prorated payment options could be applied to a variety of consumer types. City Council voted to pursue the 36-month option and administration will return at the April 8th meeting with a final calculation calendar for approval. “SB” and “LB” refer to the average size of the consumer’s utility bill: small or large.

Summary

Our first estimate was that we needed $700,000 available for payment over the course of eight business days for the two weeks of spike billing from KMEA. We only had $500,000 in our Electric Fund on hand, and we used $1,000,000 as our planning number – there was some fear that the $700,000 estimate might grow. Between NFW and cash on hand, we had a plan. The first bill from KMEA came in lower then expected, and we used it as a base line number to issue $400,000 (not up to the full $900,000 that Resolution 849 allowed) in NFWs. However, the second bill came in much higher and our total was closer to the original estimate of $700,000. Simultaneous to us issuing NFWs, the State jumped in to help cities and came up with a low-interest loan program which we used to pay off the original $400,000 in NFWs and cover most of the increased costs seen between 2/10 – 2/23. We are now working on how to best pass this “price spike” on to our electric utility customers, and will have a final plan in place after the April 8th City Council meeting.

How to Stay Informed

For residents wishing to stay informed of City news and happenings, we provide a variety of communication tools and always encourage attendance at Council meetings, which are held on the second and fourth Thursdays barring any federal holidays. Council meetings are free to attend, open to the public, and attendees are each allotted up to five minutes at the top of the meeting to voice concerns or questions regarding City business.

In addition to our online presence, the City also distributes a printed quarterly insert in the Miami County Republic that offers a comprehensive update of City news to those who might not have regular internet access. The next edition is scheduled to publish in the April 7th, 2021, edition of the Miami County Republic.

In emergency situations, the City also utilizes the Everbridge Alert System managed by the Miami County Sheriff’s Office. We encourage all residents to sign up for notifications through Everbridge.

For more information on this or any other City issue, please reach out to City Administration or your Council representative. We’re here to help!

News Release: Utility Bill Update

NEWS RELEASE
March 26, 2021

(Download PDF)

Continued Utility Billing Actions Taken Regarding Electric Spike Charges

Osawatomie, Kansas – City officials continue to work toward a solution regarding the mid-February cold snap that caused price spikes in electric and natural gas utilities across the entire Midwest. The City of Osawatomie received around $700,000 in charges for a two-week period of severe weather, which is roughly the cost of six to eight months during a regular year. The issue has been a primary topic of concern at the February 25th, March 2nd, and March 11th meetings of City Council, and officials continued their discussion of the electric spike charges at the regularly scheduled March 25th meeting.

The City of Osawatomie was glad to receive a $700,000 ultra-low-interest loan from the State’s newly introduced City Utility Low-Interest Loan Program, which was designed for use by municipalities facing exorbitant utility bills as related to the February severe weather. This loan allows the City to pay off the $400,000 in higher interest no-fund warrants (NFW) as originally issued for the first portion of the charges due, and the City is able to stretch out repayment up to 10 years as compared to the one-year repayment for the NFW. This more forgiving repayment opportunity allows us to keep the monthly impact to consumers as low as possible.

After a presentation from City Manager Mike Scanlon regarding several proposed repayment options, and after listening to feedback from the residents in attendance, Council voted to approve a proposed 36-month framework repayment calendar. A final version of the plan will be presented and voted on at the April 8th meeting before implementation can begin in mid-April. The loan program timeline and necessary actions from City Council prevented these changes from appearing on the bill arriving next week as originally stated in a March 1st release. Once a plan has been established and approved by Council, the City will notify customers of their payment options.

A complete timeline of this process and actions taken, including the proposed framework calendar, is available on our website at www.osawatomieks.org/February-2021-utility-timeline.

The City of Osawatomie and all its associated staff members, community partners, and other advisory groups are grateful for the support and understanding of residents during this incredibly trying time. This has been a period of exhaustive new information, record-breaking speed of legislation, and complicated financial mathematics. The City is proud to have been on the forefront of many of these statewide conversations and spearheaded many of the solutions being implemented across the region.

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MEDIA CONTACT: SAM MOON
[email protected]
913-755-2146 x103

February 2021 Energy Crisis Ended

For everyone who has been following along with our energy crisis this week, we have good news. We can breathe again!

Water is still running through the intake facility at the water plant and the pumps are still moving. Our power pool (SPP) has downgraded to an Emergency Energy Alert Level 0 (EEA0), which means we’re in the minimal risk level of their emergency alert system. They have also, however, asked that we and those in our region continue to be conservative with our energy consumption until 10:00pm on February 20th, 2021 due to continuing higher load demands and continuing severe cold weather to ensure grid stability as we reintroduce systems (like school districts, businesses, etc.). If the grid gets overloaded, we start this process all over again!

Thank you from the bottom of our hearts for tuning in to our updates, taking them seriously, and doing your part to keep our utilities as stable as possible. Many communities in our region were not as lucky, and we are grateful to everyone who was willing to sacrifice a little convenience and comfort to ensure continued safety for their neighbor.

This will be the last update regarding these utility challenges unless something critical changes in the coming days.

For the complete timeline of energy events, please visit our Notices page.