By Nikki McKim
During the April 5, 2021 City Council meeting, Ray Luhring, Utility Superintendent requested to take $1,500,000 from cash reserves to pay for (MEAN) Municipal Energy Agency of Nebraska electric bill. The staggering bill was for costs associated with the subzero temperatures that hit Falls City in mid-February. The costs will be reflected in a future rate increase as reflected by the Board of Public Works.
Luhring explained to the City Council that the cold stretch in February was “the perfect storm.”
“We typically have six megawatts of power that we get from Nebraska City Two [Nebraska City Station Unit 2 9NC2)],” said Luhring. “Which is put into the SPP [Southwest Power Pool] Market which counts as generation for us. We have about 2.5 or 3 megawatts of what they call WAPA [Western Area Power Administration] hydroelectric power that they do the same thing with. They get submitted to the day-ahead market and it looks like generation that we have. So it offsets what the generation costs are on the day of the market.
Luhring said around February 11, 2021, Nebraska City 2 went down with a tube leak. They shut completely down. While it’s down, we usually get 135 megawatts of credit from NC2. February 11 through the 14th, there were no credits.
“When we don’t have that, we’re at the mercy of the open market,” said Luhring. “Whatever the market prices are, that’s what we end up paying a day ahead.”
Falls City has a contract with MEAN, a non-profit wholesale power supplier and they are the cities market participants. Falls City is too small and doesn’t have the technology and needs someone that bids in and oversees the settlements and those types of things. MEAN assists the City with market purchases, as they do with several other communities in Nebraska.
“During that time, we’re exposed-it gets extremely cold and we have these energy emergency alerts come out from the SPP market and they direct what’s going on,” said Luhring. “We need you guys to conserve electricity, do what you can. I will say that our staff did a great job. The girls in the office called every commercial customer talking about conserving energy. Gary said, ‘hey, let’s set a good example and send some of our employees home so that we’re taking some of our facility usage down.’ I called industrial customers; they were extremely cooperative and shut some of their operations down.”
Luhring explained that as this continues, you bid your low the day ahead; they take the cities nine megawatt and put it in. If that’s the low for the day and different hours and the price is $20, if we’re exposed to the market, that’s what the City’s going to pay. If it’s $1,000, that’s what the City will pay.
“Very rarely I’ve seen this happen before and typically; we’re covered. Very rarely do we get out into the open market except in the summertime when it’s really hot. Last year it averaged completely $17.81 a megawatt-hour. There were times during this five and six-day stretch that the power actually hit over $4,200 a megawatt-hour,” said Luhring. “So when we’re short, we’re sitting out there at the mercy of the market.
The Board of Public Works and Gary Jorn met with one of the MEAN higher-ups to discuss the situation.
“I kid you not; you could have knocked Gary and I over with a feather when he told us 1.5 million dollars,” said Luhring. “We had no idea.”
Luhring said they were unaware that NC2 was down and the Utility Department was under the assumption that nine megawatts were being put in on the generation side and the City was covered and it was “not an issue.”
Falls City is not the only community in this situation. Luring told the City Council about Scribner, Nebraska, a town of 500 people being slapped with a $510,000 utility bill from the cold spell. Scribner is also a customer of MEAN and expects a typical February utility bill of $20,000. The town had to borrow nearly half a million dollars from the town bank to cover the bill. Falls City has the reserves and is financially stable, which is an opportunity that other communities may not have. Luhring said he expected MEAN or The Energy Authority (TEA) to call the City and explain the issue, that the City needed to generate what we could for us to reduce exposure, but the call didn’t come from MEAN or TEA.
MEAN filed a dispute on behalf of the City of Falls City for the settlements.
“I doubt that’s going to account for a whole heck of a lot,” said Luhring.
Luhring now gets updates every day from NC2. “as far as tomorrow, here’s what we’re putting in the market for you. I know what we’re getting from WAPA,” said Luhring. He said he’s also getting several daily updates as to the plant’s status and he’s asked MEAN to show him what TEA puts into the market for the City the day ahead. “So I’ll get the megawatt-hours for every hour, the amount of money for each hour, so I’ll know.”
He said he’ll know what that’s going to be for the next day and what the City’s going to owe, so if there’s a situation like there was in February, and the weathers going to extend three to five days, he’ll be able to come up with a game plan for days two, three, four and five and maybe do something different.
Aligning with the “perfect storm” of this past February, there were issues with the diesel fuel gelling, so the City couldn’t generate as much as they liked and that caused problems. “Like I said, it just couldn’t have lined up any worse for us than it did,” said Luhring. If the City doesn’t pay MEAN the $1.5 million, they will be in default and power will be cut off. “People don’t believe that sometimes, but that is the case,” said Luhring.
The BOPW discussed a few different ideas to bring up to the City Council, so the City isn’t in default. The American Public Power Association CEO has written a letter to President Biden asking for relief for communities like Falls City and Public Power Districts that were affected. If the City has paid, they will not be in default and can work through it as they go.
“If all else fails, we were talking about scenarios of how we can replenish that money back into reserves,” said Luhring. The BOPW had someone do a rate study. He came up with the megawatt-hours and the sales and different quantities that apply to the Power Cost Adjustment and other options over time. The BOPW will discuss those at the next meeting.
Councilperson Don Ferguson questioned how NC2 has 100+ credits, but Falls City didn’t receive credits and what that means.
Luhring explained that if they’re up to full load Falls City gets 135 megawatts per day. That’s the City’s portion of the power plant when it’s at full load. When they’re at zero, the City gets nothing; the City’s going negative and doesn’t get credit for 135 megawatts in the market.
Ferguson asked why there was such a lack of communication with NC2 after Falls City invested nearly $10 million into their expansion and why daily updates weren’t sent on the plant’s status.
The way Luhring found out about the updates was from a general manager from another Utility Department. After the other manager asked Luhring about the day ahead schedules, he said he hadn’t seen them and they got that rectified.
Ferguson asked Luhring about what responsibilities OPPD has taken with this financially. Falls City gets a lot of its power from NC2, which the City invested in and they failed us big time.
Luhring said there’d been no conversation with OPPD regarding recovery of losses due to contracts written on that topic unless OPPD had done something completely negligent, which they didn’t.
“ I mean, they had a tube leak which was out of their control. They had to take the plant down,” said Luhring.
Ferguson said he thought the notification of a tube leak and the fact that NC2 was shutting down half their facility, which Falls City gets its power from, was pretty significant and worth a phone call, especially “when we’re supposed to have 50-degree weather coming up. Did they contact us about generating our own power, to begin with?” said Ferguson.
Luhring said the reason they did that it wasn’t from a direct directive from OPPD. It was because SPP instructed OPPD and said, “you’re going to curtail the load. This is how much load you have to curtail. So then it’s up to OPPD to curtail that load wherever they see fit. I would do the same if I were OPPD. They’re going to take care of their retail customer first. We’re at the end of the line. We’re not a retail customer. They’re going to say, well here; this saves us nine megawatts or 10 megawatts of load. We got a phone call that said we’re going to cut you loose here in 30 minutes,” said Luhring.
OPPD called the Power plant and told them they would be cutting them loose. Luhring said the diesel was gelling, so the plant couldn’t generate as much as it needed to cover, so OPPD chose to let Falls City stay connected.
“We still generated as much power as we absolutely could to keep that load down for them,” said Luhring. “But they let us stay connected, so that was very helpful for us because we were in a jam as far as our generation running far as the fuel. We were having issues.
Gary Jorn explained that it was because of not being able to use natural gas. Southern Star said only residential, only for human need. So they couldn’t switch over to natural gas.
“Normally the City we start diesel and run natural gas. We would have if OPPD then, I guess, back up. We would have been in rolling blackouts through the day, two days, three days,” said Jorn.
“We could have initiated that anyway with things SPP was saying to do, but I’ll be honest with you, my opinion is the safety and well-being of our citizens and customers comes first,” said Luhring. “We weren’t going to put anybody in the dark. We weren’t going to put anyone without heat if it was within our control.
Jorn acknowledged there was a miscommunication between the City and MEAN. He said it would be discussed and continue to be discussed because they should have at least known what the market was and what the City was being exposed to.
“We are 1.5 million dollars not communicating with MEAN on this,” said Ferguson. “And everyone around here did what they were required to do. People were shutting down. So everything we’re billed for usually goes through our light meter and some of us turned our heat back and everything. Made this sacrifice did all that, yet MEAN sets aside 1.5 million dollars which is a reserve and we’re going to turn right around and replenish that with a rate increase when we’ve already done our part at the time with sacrifice at home to make things right. People missed work and there were retailers without cash flow, but it really irks me to go back to the point that OPPD, NC2 is down because, whatever it was. And we weren’t notified, yet they can make a phone call “yeah, we’re going to help you out with the power the day of the crisis” I don’t understand where there’s such a huge lack of communication from OPPD and NC2. Like I said, we invested [nearly] 10 million dollars and were not getting the courtesy of a phone call like, hey, we’re down? Especially when they see the impending doom. Everybody saw that. We saw the storm rolling in. Now it cost us 1.5 million dollars. We were actually very complimentary about how things went and that’s right, we all had heat in our houses and lights and so forth; some people went without work for a day or two because of this, but this has a really rotten taste. I wish MEAN and OPPD were at these meetings so they could explain to us instead of putting you guys in the middle of it. You’re doing what you can do. I still cannot believe that they didn’t give us a call when they’re down. I just cannot believe that.”
Councilman Derrick Leyden asked how much did Falls City actually generate because, at one point, the City thought we were generating solely by ourselves. Luhring agreed that he also thought the City was generating power on its own because he was told we were being cut loose in thirty minutes and never heard any different. Three to four hours later, he was at the power plant talking to the manager and found that the City was not cut loose.
“But, we’re generating as much as we can to get that load down and we did. Unit nine did fairly well. It doesn’t run as well on diesel as it does on natural gas or as efficient and we were down around six megawatts and we were bumping 10, 10.5-10.7 megs during the high points of those cold days,” said Luhring. Had we had our full allotment, we still would have been exposed to the market, but at a much, much, much, much lesser degree.”
Luhring said the City got hit on the electric side and it was frustrating to everyone involved, but he praised the City on the natural gas side. Many utilities in smaller cities got hammered on their natural gas systems because the price of natural gas skyrocketed. Falls City has gas in storage that was purchased during the summer.
Mayor Bindle asked if steps were being taken to prevent the diesel gelling in the future.
Luhring said that it’s being worked on. A plan is in place and a trailer has been ordered as well as a thousand-gallon tank. The tank will be put in next to the door that goes into unit number nine, and a hose will dump straight into the day tank there that will only be filled with additives in November. If it isn’t completely used in the winter, it will be burned off in March and ran with one of the units so that it’s empty again to be done each year. A heater was also placed in the pump house because the pump was freezing up.
Leyden asked Luhring to prepare a contingency plan. Luhring said he would write a report with steps that led to this situation and what went wrong and what went right.
Leyden asked that it be done for the community, especially when they see that there would be rate increases.
The Journal reached out to MEAN for comment and this was the response we received:
February’s unprecedented weather event and
market impacts
February’s extreme weather event across the Southwest Power Pool (SPP) footprint was unprecedented in SPP’s 80+ year history. Extreme cold temperatures impacted nearly all of SPP’s 14-state region, causing highly volatile market pricing due to soaring demand for electricity and curtailed power supply.
Falls City is a service
participant of MEAN
The City of Falls City is a service participant of MEAN. As a service participant, MEAN does not supply energy to the City as they buy their energy directly from the SPP market to serve their electric load. This arrangement has been in place for several years and SPP market pricing has historically been beneficial. MEAN assists the City with those market purchases, which is a pass-through cost from the SPP market to the City. MEAN does not receive revenue from the City’s market power purchases.
Fall [sic] City’s market-based
arrangement
In Fall [sic] City’s market-based arrangement for power supply, there is exposure to market volatility. The City’s local generating units are not registered in the SPP market and are typically used for summer peaking situations and system reliability by the Omaha Public Power District, the transmission operator in Fall [sic] City’s area. During the weather event, there was significant price discrepancy between the market’s day-ahead and actual real-time pricing. MEAN works with a third-party provider for energy dispatching services. We will be working with that provider, SPP, OPPD, and Falls City to evaluate the best strategies relative to operating non-registered units in such an unprecedented event.
Working with the City
and Legislature
A representative from MEAN met with City staff in March to explain the situation and we are working with the City to discuss options and strategies for the City’s generation units. MEAN is also working with state representatives in the Nebraska Legislature to support financial assistance for municipal utilities impacted by significantly high bills.
About MEAN
The Municipal Energy Agency of Nebraska is a not-for-profit wholesale electric supplier and service provider to more than 60 smaller municipalities in Nebraska, Iowa, Wyoming and Colorado. MEAN is governed by its member-owners through representation on MEAN’s Board.
Mayor Bindle said many employees put a lot of heart and soul into the day of the frigid weather to make sure customer’s needs were met.
Ractliffe made the motion to approve the request to take $1,500,000 from cash reserves to pay for the Municipal Energy Agency of Nebraska electric bill. Merz seconded. The motion carried.
Gary Jorn updated the Council on the process of hiring a new police chief. He said they were discussing how that was going to be handled. The police hiring and fire committee would be meeting and making some recommendations to the mayor.
Sondra Ferris and Jorn recently completed their first year of clerk school. Jorn also reported that the city would be looking for summertime help near the first of May.
Mayor Bindle highlighted volunteers as part of National Volunteer month, saying that volunteerism has grown extensionally. She said most organizations and small towns such as Falls City wouldn’t function without volunteers.
“They make a difference in our community and in someone’s life,” said Bindle. “They are the backbone of our community and make Falls City a better place to live. I want to wholeheartedly thank volunteers who give so much of themselves and I would also like to challenge everyone in here to thank a volunteer. I know there’s a lot of volunteers in this room that make Falls City a better place.”
Zechariah Bragg, of The Den at 1800 Stone Street requested a Liquor License. A public hearing was held; no one spoke on the matter. Seven voted yes, motion carried.
Jon McQueen requested that Barada Street from 17th to 18th be closed from 8:00 am to 6 pm on April 16th through the 18th for Fireman training with the ladder truck. McQueen said it would give the firemen a safe zone to learn and observe for training with the truck. This area would also be away from the ambulance barn so that it won’t block any emergencies and traffic near Pioneer Plaza. Seven voted yes, motion approved.
Amber Holle was appointed to the Southeast Nebraska Housing Partnership as recommended by Anthony Nussbaum. No discussion was held. Motion carried.
A discussion was held about a request for no parking on the south side of the street from Harlan to Lane street on 26th. First Ward Councilperson Don Ferguson said he had fielded some complaints about vehicles parked on that street. With businesses in that area and problems with bottle necking motion was carried to make the area on the south side of the street no parking.
