BY TONY FURSE | February 17, 2021

 

Drop you thermostats - Residential $40 gas bills could go to $1,000

 

La Cygne restaurants are among the local businesses closed at least for today (Feb. 17) to heed a natural-gas conservation request issued from a special city council meeting yesterday (Feb. 16), the request's intent that gas consumption be prioritized for citizens' "health and welfare" within their homes.

Facebook pages for Family Cafe, Lucy's Bar and Grill, and Simple Simon's all note the temporary closure. Nana Jo's is also closed. The kitchen at Casey's General Store, however, is open.

Those closures come in response to an emergency gas order distributed yesterday afternoon following the noon-hour special meeting. That order can be found in full on the La Cygne Facebook page at www.facebook.com/<http://www.facebook.com/>CityofLaCygne.

The crisis is a combination of potential natural gas price and availability in light of the two-week Arctic cold wave--Tuesday morning lows at the five Linn County weather-measuring stations were anywhere between minus 12-16 degrees, the coldest since two nights of minus 20+ readings on Dec. 22-23, 1989.

At yesterday's meeting, Jodi Wade, city clerk, explained that information received late last week by the Kansas Municipal Gas Agency (KMGA) showed their Friday “locked-in” pricing on the free market to purchase natural gas was $325 per MMBTU (one million British thermal units). KMGA had been purchasing gas at $3 per MMBTU.

"This is uncharted waters for everybody," she said.

KMGA last Friday purchased $30 million for a four-day period ending yesterday (Feb. 16). She said KMGA was required to make a $1 million deposit "to keep flowing these four days." KMGA's annual budget, she said, is $8-to-9 million.

La Cygne buys its gas through KMGA, and though city leaders hope a best-case scenario might be to pay $70 per MMBTU, Dan Nasalroad, public works superintendent, said it would be no guarantee.

"$325 is what they bought. There's no guarantee they'll absorb down to $70 per MMBTU."

Today's posted index price for Panhandle Eastern Pipeline, the transport line from which La Cygne channels its gas supply at Henson, is $129.39 per MMBTU.

Added Wade, "Don't expect if the temperature comes up at the end of the week that these prices are going to go down" because of depleted reserves for the cold wave that has gripped much of the United States.

Noted in yesterday's emergency order, the city's cost for a month's supply of 12,000 MMBTU at $2.628 would be $31,536. At the $325 level, the city's cost would be $3.9 million.

By comparison, La Cygne's total 2021 pass-through gas budget as approved last summer is just under $1.9 million.

Faced with a choice yesterday of whether to shut off its gas supply and set up warming centers or continue to buy gas and face what he  labeled as price gouging, Councilman Jerome Mitzner said the city should be committed to maintaining a gas supply to citizens.

"But how are we going to pay for this?" with one possibility, he said, the floating of a utility bond "until this all gets sorted out," a move confirmed by Wade.

Referring to information received from Doug Barlet, Linn County emergency management coordinator, Nasalroad reported that some Kansas cities have chosen "to close spigots because of cost and open warming shelters. They have no choice. They can't pay the $325 per MMBTU."

Gas shutoff would require an alert to residents and businesses to drain their water pipes to prevent freezing.

According to the Kansas Corporation Commission, Nasalroad said, natural gas purchasing (such as by KMGA) is an unregulated market and "we've already purchased what we've agreed to" on a previously-agreed contract.

Added Wade, "If exceeded, then they're out on the free market's daily index. That's where prices were rising during the day on Friday."

Mayor Debra Wilson feels that government entities will step in. Gov. Laura Kelly issued a state of emergency for Kansas on Sunday. The Linn County Commission this morning issued a county state of emergency. And Jackie Messer, county public works coordinator, told commissioners of a possible Federal Emergency Management Agency emergency declaration that would free up federal funding.

Agreed Nasalroad, "I can't imagine [governments] are going to let these towns shut it off."

He warned, though, what even a 2,300 percent increase for a "price break" to $70 per MMBTU--if KMGA could even afford to do that--would mean for La Cygne gas customers.

"We could eventually be shutting off a lot of customers. This is a catastrophic event for people," Nasalroad said.

In discussing usage, Nasalroad said the city's largest natural gas consumers include Industrial Park industries (Harsco and U.S. Minerals) and Beachner Grain, Inc., all for drying purposes, as well as Whistle Ready-Mix.  Other big consumers are the elementary school, which has been closed since Friday, and the public library, open on a limited basis today, according to a Facebook post by Chris Waddell, director.

Nasalroad questioned what rights the city might have to ask businesses to shut down and/or turn down thermostats.

Because La Cygne is the supplier, Burton Harding, city attorney, opined that the city can "put reasonable restrictions on, as long as no one's singled out."

Wade confirmed this morning that the city reached out to Harsco, U.S. Minerals, Beachner Grain and Whistle Ready-Mix, asking them to close down or reduce their operations only to a health-and-wellness necessity, for example heat for office areas and restrooms.

"If they were high users for production, we asked them to stop their production."

She said, though Caseys' kitchen is all electric, they still received an explanation of the importance to conserve on usage.

Among restrictions, Harding said, could be usage limits. Wilson asked, "How would we make this happen?"

Aside from reading meters daily for consumption, Harding said that "it would be tough to impose fines."

A consensus was that corporations could assume the inflated prices, etc., as a cost-of-doing-business.

Harding said a "hybrid deal" could be to offer an 'x' amount for consumption, "and when it's gone, it's gone."

Added Wade, "Tell them this is the top. We can't go past that."

Echoed Nasalroad, "Once it's gone, it's gone."

Advised Harding, "The city can't bankrupt itself."

Wade said La Cygne has a filed water emergency plan--primarily for severe drought--that contains such procedures to establish prescribed "levels and amounts," but was unsure of Harding's inquiry if gas carries such regulations.

Councilman James Thies said to let businesses know how a mandatory shutdown in order to serve only residential "health and welfare" would affect them.

Added Mitzner, "And let citizens know that a previous $40 gas bill could now be $1,000."

Nasalroad added that the city request homes to drop their thermostat reading--"Don't put it all on businesses."

Maybe Mitzner summarized the city's quandary, "I don't think there is a good answer."