A loan would reduce gas pain
HUMBOLDT – Help is on the way.
A bill signed by Gov. Laura Kelly on Wednesday could ease the immediate burden Humboldt faces due to his utility-related financial crisis.
Recall that increases in natural gas tariffs during the recent cold snap hit towns in Kansas, including Ellinwood, Pratt, Altamont, Winfield, Lyons, Burlingame and Humboldt, with unmanageable utility costs.
Humboldt’s total bill was $ 1.6 million, a blow to the city and the residents.
City administrator Cole Herder said, “I have an example of a family whose bill is typically less than $ 200 per month. Their bill for that month would have been $ 5,400. This is an exceptional case, but I just know that our residents cannot stand it.
“And our major manufacturers, it’s just astronomical the amount they would have to pay,” he added.
“Our customers can’t handle this kind of bill in a month,” Herder said. “It would bankrupt everyone.”
The dramatic situation requires a solution.
Herder mentioned that initially it was hoped that price negotiations could be conducted at the supply chain level, but that would be difficult, he said.
He and others also looked at FEMA disaster relief, but to no avail.
Utilities might not be eligible for future federal COVID-19 relief either, Herder noted, and the timeline would be too long anyway.
Enter Kansas Senate Bill 88, which was quickly overhauled and passed at record speed.
“It will provide up to $ 100 million in loans to cities that have been affected,” Herder said.
Herder further explained that “this legislation allows us to be legal and to have the loan long enough to help us recover.”
He added that “what we hope is to apply for a loan for the total amount of $ 1.6 million, and we have up to 10 years to repay it. I looked at what it would cost per unit, and it would cost about $ 2 per unit, over the next 120 months, to pay off that debt. “
For the next 10 years, the cost of natural gas to Humboldt residents would therefore be $ 2 more per MMBTU.
The typical cost per MMBTU is around $ 3 to $ 3.50.
“Right now I think it’s probably the only viable option for us and our residents,” Herder said, especially since “the money will be made available almost immediately”.
Any action plan must first be approved by Humboldt City Council, however, which is due to meet on Monday.
“We will work together to resolve this issue,” Herder said. “We don’t want people to lose sleep or worry about how they’re going to pay for it.”
“I appreciate their patience and their confidence that we are going to do the best job possible.”
As for the review and analysis of events at Humboldt, “it’s been a busy two weeks,” Herder said.
After the cold snap started around February 9, the city received a notice from its gas supplier, KMGA, asking consumers to restrict use. The city has done so and has asked residents to do so through social media as well.
The Humboldt school system helped with the situation by shutting down thermostats and declaring snow days, and local manufacturer B&W Trailer Hitches shut down key parts of their operation.
“The residents have been great and the businesses have been great in helping us conserve,” Herder said.
“We probably should have used double the gas we used in January, but we only used 25% more. I know there have been significant savings on people’s parts. “
Despite the impressive team effort, the situation took a turn for the worse.
Herder learned on Valentine’s Day that an emergency city meeting had been called and he immediately knew something was wrong.
The price of natural gas was skyrocketing. First at $ 329 per MMBTU, then $ 622.
Again, this is normally around $ 3 to $ 3.50.
“This was for the top third of our usage, because the bottom two thirds had already been bought in the futures market and we had already secured them,” Herder said.
By the time the dust settled, however, the situation looked grim.
“Typically, we’re billed around $ 35,000 per month,” Herder said. “But we have been told that the February cost estimate will be $ 1.6 million.”
“Our annual budget for gas supply is approximately $ 375,000.”
Given the drastic gap, in response, the town of Humboldt declared a financial emergency, and the county also agreed to do so on its behalf.
Herder said he had also had conversations with lawmakers at all levels, including Representative Caryn Tyson, Senator Roger Marshall and Lieutenant Governor David Toland.
“Everyone is interested in why this happened and how can we stop it in the future,” Herder said.
As to who he thinks is responsible, Herder absolved the suppliers, the pipeline managers and the city itself.
“The gas we buy is traded on a daily index,” he said. “So we think there were people who profited from the gas business who never had any contact with the gas.”
In short, this appears to have been a problem with price gouging, he suggested, with calloused stock traders cashing in as residents had to choose between going bankrupt and freezing.
The Kansas attorney general’s office and the Federal Energy Regulation Commission are formally investigating the situation.