Q: It’s been a wild ride in the energy markets since February last year and Mr. Putin’s excursion; what’s your assessment of the U.S. energy sector overall, and how well-positioned is it for stability in 2023?
A: Before Ukraine, it was somewhat of a roller coaster, throughout COVID-19 and that period before Ukraine. We expect all of our prices, the whole sector, to be somewhat elevated above the pre-COVID and Ukraine levels. We do see some things stabilizing over the balance of the year. The international market is playing a huge role in how we recover from the stress on fuel and energy prices in this country. We do see us getting past this at some point, with things becoming stable in the domestic market as we find new supplies.
Q: What’s the outlook for that—new supplies?
A: Our national oil reserves are being restocked, and I hope we get back to more stable gas and oil prices. As long as we don’t get too long of a winter, gas prices should be stabilizing; there’s been a lot of pressure on gas markets. As we look further out, things are more optimistic.
Q: That’s the national framework; what’s the local picture look like?
A: Our rates are what they are as far as base rates to the community. We do have variances in bills for the costs of purchasing power when we go to the market. Because of that volatility, customers are not immune; they see those changes. But with a diverse fuel mix in our own generation, that shelters us in our community a bit. Those utilities that depend 100 percent on the market are really more at risk than we are. Our generation mix softens that blow, it has continued to serve us well and I expect that will continue to be the case. We’ve been able to put a lot of energy into the market, even as we buy back from the market. That exchange has proven to be beneficial for both the utility and the community.
Q: Can you reflect for a bit on the difference between municipal and investor ownership? What are the key distinctions, and do any of those eventually show up in power rates?
A: Municipal ownership is part of it. I think we’ve also done a good job of managing this utility from a cost perspective, working hard to keep costs low. We do serve an economically challenged community, and that is not lost on anyone at this utility. So we operate as efficiently as we can, keeping our customers in mind. The other thing that differentiates us, being publicly owned, is that in addition to keeping prices low, we provide a lot of services back to the community, and those go a long way to help in sustaining the community, local government, and the citizens who live here, as opposed to investor-owned utilities, who are also concerned about profits and returns to investors.
Q: The sector overall is heavily regulated; does that also produce differences based on the ownership structures?
A: We’re not as regulated as much as the investor-owned side of our business. Having said that, we are governed by a board of directors whose members are selected from the citizens in our community, so they have a vested interest in making sure our operations are where they need to be, along with management. And a vested interest in making sure our service is best in class. We provide a lot of support to the city-county Unified Government, and those services go back to the community to help as a whole and take the pressure off the UG in terms of the services they may have to offer. But strictly compared to investor-owned, we are more entrenched in making sure services are what they need to be and managing cost control.
Q: You’re tied into a regional power grid that you don’t control—do you have any concerns about the broader infrastructure through which you’re transmitting and receiving power outside of your own assets?
A: We’re connected throughout the region and state electric system, so we bring power in and export power out to the grid across the Midwest, and that’s important because other systems are also using our system to take power from one location to another, not just the BPU and the BPU grid. Maintaining that connectivity is important. We also have ties to neighboring utilities, not as much on the electric side but with water sources and supply. We have wholesale customers and send water out to those communities who depend heavily on having that water available to them 24/7.
Q: Now that we’re talking water, can we address the longer-term supply challenges and, for the near term, any concerns with the effects of a prolonged drought?
A: Not so much for us. We all know what’s going on in the state of Kansas with the situation farther out west. But the BPU is very fortunate to have an abundant water supply. We take our supply from some huge aquifers underneath the Missouri River. Not the river water itself but wells that go 90-100 feet under the river. That helps us maintain adequate supplies—they are not subject to impact from flooding or other things you might normally see with the river itself. That abundance of supply protects our communities from working through drought situations that come with reservoirs, rivers, or other places that utilities will draw from. We feel very fortunate to be in a much better place to have the supply systems we have. We also have the adequate storage capacity to get through short-term disruptions.
Q: Is the water table in local aquifers facing the same kinds of issues the Ogallala has for irrigation in western Kansas?
A: No, not as far as we can tell. Going back to the 1993 floods, there were a number of issues that made us go back and rethink things and ask, “How do we ensure more stable supplies in the future?” We were very fortunate to locate the new sources we have, to come up with the funding to create the plan we now have, and with the state-of-the-art facilities we expect to be in place for decades to come.
Q: What about the economic development aspects of your mission, especially in a county known for its manufacturing muscle?
A: We’re projecting stable but slow growth in the industrial sector; we haven’t seen as much growth there as on the commercial side. Our industrial customers have had certain challenges themselves with inflation and the recessionary periods we’ve gone through. A lot is dependent on sales throughout the U.S., and while our customers’ business sectors are very diverse, they are not totally immune from market conditions in this country. We do have key account people who meet on an ongoing basis with customers, have annual meetings and have fireside chats with them to keep in touch, see how we’re doing, and what we can do to be supportive of them.
Q: Are any of those sectors suggesting strong growth ahead?
A: While the biggest growth we’ve seen is more on the commercial retail side within Wyandotte County, we’re hoping manufacturing can pick back up or is on an uptick with us because that’s going to attract new business. With all the large warehouses here, when you see that growth, it all adds up. It may not be as energy intensive—comparing one warehouse to one manufacturing plant—but we’ve had a good run building that type of business out, and the more we do, that’s certainly better growth than we’ve seen on the residential side. That growth helps stabilize things for the utility, and it provides jobs, something we never want to lose sight of in this county.
Q: Finance professionals we report on tell us that most of the pandemic-era federal assistance for those at the lower income levels has been exhausted. Is that showing up with your customer payment levels and timing?
A: I know the state assistance has run out if I’m not mistaken, and the housing piece is about to run out, and utility assistance is coming to an end. I don’t know what’s on the horizon for the state, exactly, but we’re certainly tracking what’s coming out of Washington and keeping a close eye on what may come out to help the community. The economics of our community, the people who live here, some struggle with just having the resources to pay their bills and get by, whether that’s utility bills or other aspects of affordable living—it’s sometimes a struggle.
Q: From your side, are you pressing any legislation through either Topeka or Congress for the upcoming sessions?
A: We have been working with our congressional delegation, particularly with Rep. (Sharice) Davids and Sen. (Jerry) Moran, to secure funding. We know some level of federal funding is coming through, but we don’t know the details yet, for a backup generator for the water treatment plant, which is crucial—really great news there. We’re going to be monitoring, from as far as D.C., by going there in the early part of the first quarter to visit with lawmakers on the Hill to do some grass-roots lobbying in a number of areas. Infrastructure funding is crucial for us, particularly on the electric side. There are still supply-chain issues and disruptions, we want to protect municipal bonds, and cyber-security is always important in this age. Then with bills related to climate change, we’re already 48 percent green with our generation, but there’s a fine line between the cost of new technology to be even greener and the incremental benefits because that goes on the backs of rate-payers. We have to make sure that legislation gives utilities time to ramp up.
Q: Can you address that green challenge in more detail?
A: We are leading most states and utilities with our green portfolio, but we have to be careful that as the technology has continued to improve that we’re not impacting our ability to provide service or our prices. We have to be conscious that green can be more expensive. People want it, but can they afford it? And we have to address the grid so as not to suffer through that challenge.
Q: Any final thoughts?
A: We’ve been talking about this for a while; if this country can get its arms around a national energy plan, that’s where we want to be in the next few years—longer-term plans, especially, will help. As far as the House and Senate being controlled by different parties this year, I don’t want to get too political, but if the moderates can find more of a voice, that’s where you can build consensus, where you can push a political agenda and bills that make sense, as opposed to extreme groups that go into their corners and not move legislation forward. My hope is that Congress will do that over the next couple of years and beyond. We seem to have the best opportunities at times but seem to let a lot of things get in the way of realizing them.