Mayor Connelly, Jerry Little voice divergent opinions on KyMEA contract

On Monday, Berea Mayor Steve Connelly presented the results of a study evaluating the merits of an agreement with the Kentucky Municipal Energy Agency (KyMEA), marking what he said will be a broader public discussion of the city’s energy policies.

The study was initiated in the fall of 2017 after the Berea City Council voted 6-1 to terminate all agreements with KyMEA. KyMEA was to provide transmission of electricity as well as 10MW of capacity – additional power the city could count on in the event of a winter energy crisis. The city has also contracted with American Municipal Power (AMP) to provide 25MW of power. Both agreements commence in 2019 when the city’s contract with Kentucky Utilities ends.

The potential savings the city would theoretically gain by purchasing that 10MW of capacity through KyMEA is cited as one of the city’s main incentives for entering into the agreement. Through the agreement, Berea can maintain a virtual insurance policy of 10MW of capacity during the city’s peak usage period – only during winter months – instead of paying for an entire year of that capacity. Instead of paying $360,000 a year for that 10MW, Berea Municipal Utilities will instead pay $120,000 a year, say city officials. Carrying that savings over the life of the five-year contract, city leaders assert BMU can realize a savings of $1.2 million.

Further citing the findings of the report, Connelly outlined five steps the city will take.

On the advice of legal counsel and a municipal auditor, the city will remain a member of KyMEA, since terminating the contract would be, in the words of one consultant, “highly imprudent.”
Form a policy study group to forge an energy policy and seek alternative energy options after 2024.
Direct staff to have the KyMEA contract amended to allow for termination in 180 days, not the 30 days originally stipulated.
Direct staff to clarify KyMEA’s costs and billing procedures.
Instruct staff to document AMP’s commitment to provide 25MW of capacity and finalize a commitment with KyMEA to provide an additional 10MW of capacity.
Council members Jerry Little, Ronnie Terrill, David Rowlette, Jim Davis and Bruce Fraley attended Monday’s presentation. Little delivered a rebuttal to Mayor Connelly’s remarks after Connelly wrapped up the question/answer session, then turned the podium over to the five-term council member. The mayor went directly from the meeting to give an interview to WBON-TV.

At a few points in his presentation, Connelly praised Little’s initiative and diligence in trying to sort through the complexities of both the contract and Berea’s energy policy. Connelly also noted the city will take steps to address the specific concerns raised by Little, particularly when it comes to the length of the contract, clarifying KyMEA’s billing policies, and clarifying the precise cost of the 25MW of power the city will secure through American Municipal Power (AMP).

Little remained unconvinced about the need to contract with KyMEA, however. For example, Little disputes the idea that Berea needs to buy the 10MW of additional capacity. Instead, Little maintains that Berea need not purchase that additional capacity for two reasons. In his opinion: 1. Based on history, it is highly unlikely that the system would face a massive power failure that would necessitate a need for what amounts to a $120,000 insurance policy. 2. That in the event of power failure, AMP is contractually obligated to purchase and deliver whatever power the city needs.

The report disputes Little’s assessment, however, noting the entity that would initially deliver Berea’s energy, the Midcontinent Independent System Operator (MISO), had declared 10 maximum generation emergencies in the 18 months since the start of the 2016/2017 planning year. Said the report: “Capacity is important because, in an emergency, the first load that MISO curtails is non-firm exports. However, an export transaction that is supported by capacity is deemed a firm export and will be curtailed only as a last resort.”

At Monday’s meeting, Little stated that KyMEA would probably be a “good company once they get started,” but he has consistently voiced concern about contracting with an entity that was formed in 2015. But the city’s due diligence report asserts that KyMEA is an outcropping of the Kentucky Municipal Utilities Association (KMUA), which evolved from the Municipal Electric Power Association of Kentucky (MEPAK) that was formed to serve local municipal utilities in 1975.

Since it’s inception, KyMEA is now serving 10 other municipal power entities in Kentucky, including members from Barbourville, Bardwell, Corbin, Falmouth, Frankfort, Madisonville, Paris, Providence, Benham and Owensboro.

In past meetings, city council members expressed hope that a representative of KyMEA could come to Berea and address the city council.

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