February's Cold Weather Event

Our commitment to your best interest as a Bluestem Electric Cooperative member is always at the forefront of our operations. In the time since the Polar Vortex phenomenon, there have been many discussions and meetings regarding the outages that some of our members experienced and the cost of this event. To keep you informed, we want to communicate to you, our members, what happened and what you can expect to see on your bills in the coming months.

• A mid-February Polar Vortex caused historically low temperatures, and ice/snow gripped many regions of the country, stressing both electric generating capacity and the ability of the transmission grid to move power from state to state and region to region.
• Emergency alerts quickly declared by the Southwest Power Pool (SPP) forced many electric cooperatives into outages due to the inability of electric generation supply to meet demand.
• Generation by natural gas was an issue at this time:
  • Depletion of natural gas supply due to increased use by residential, commercial, and industrial users created high prices during a short time frame.
  • Some natural gas suppliers were not equipped to handle the extreme cold, which left the supply frozen in the ground.
• The inability of renewable energy to produce, such as wind generation, at this time due to the extreme cold also placed stress on natural gas generation units, which had to make up for the shortage of generation capacity.
  • Natural gas generation is typically used to back up renewable generation. This escalated demand and depleted supply caused the price for natural gas to drastically increase during this time frame.

• The SPP oversees the bulk electric transmission system (often referred to as “the grid”) and manages the reliability for a 14-state region that includes Kansas.
• The SPP does not generate electricity or own power lines or substations but, rather, is tasked with operating the power grid in a safe and reliable manner.
• SPP handles many power transactions in any given time frame. It will take the SPP up to 120 days to go through the transactions to determine the final costs associated with the Polar Vortex event, and even then, with regulatory agencies and state and federal politicians involved, the process could take longer to determine final, attributable costs.
• The SPP has never in its 80+ year existence had to implement power curtailments and has never dealt with this extreme type of phenomenon.

• The SPP declared and broadcasted that they had enacted an Energy Emergency Level 1 that began Sunday evening, February 14, to conserve energy. During brief periods on Monday, February 15, and Tuesday, February 16, SPP elevated the Energy Emergency to a Level 3, which required prompt response.
• These Energy Emergency declarations resulting from record cold temperatures forced transmission-owning electric utilities within the SPP region to take extreme steps to prevent catastrophic damage to the power grid.
• Mandatory power curtailments are controlled at the high voltage transmission level, which Bluestem does not own; our office was given no warning or notification of the curtailments that were implemented until the moment the power went out.
• Grid operators, like the SPP, operate with a focus on the overall reliability of the electric grid. When demand exceeds supply, grid operators have the authority to mandate curtailments like some of our members experienced a couple weeks ago.

• ACTUAL USAGE COST: Your bill for February will more than likely be higher simply due to increased energy usage to heat your home during the extreme cold weather. The normal rates will apply for this usage.
  • Space heating and water heating are the two biggest drivers of energy use in most households, accounting for over 50% of a home’s energy use during the winter months.
  • Heating equipment will run longer to maintain the temperature setting as outside temperatures drop. As an example, your furnace will run longer to maintain an indoor temperature setting of 70 degrees when the outside temperature is minus 21 (actual low temp on Feb. 16) compared to an outside temperature of 30 degrees.
• POWER COST ADJUSTMENT: Each month our members see a power cost adjustment (PCA) to their bill. Sometimes it is an additional amount and sometimes a credit. Our power supplier, KEPCo, determines this adjustment every month, which is dependent upon the fluctuating cost of fuel and purchased power. This is where Bluestem members will see the price adjustments for the energy emergency crisis. The good news is that KEPCo established a cap on the energy/PCA for Bluestem, for the month of February usage, not to exceed $0.033 per kilowatt hour. Once Bluestem receives KEPCo’s PCA amount, we will calculate the Bluestem PCA and run it through our billing process. As of this time, there are too many unknown factors to determine exactly what the PCA amount will be. "We anticipate the final cost related to this energy emergency crisis to be settled around late fall 2021. As discussed, these final cost will be added to the PCA calculation each month as they are billed by our power suppler throughout the entire year of 2021 and possibly into 2022."

• The good news is that Bluestem believes we were more protected from market conditions than some other utilities. Given the energy emergency situation, less exposure to the market during this time is viewed as a reasonable safeguard to our members.
• Bluestem’s resources (Wolf Creek, Iatan 2, Federal hydropower allocations and the Sharpe diesel station) generated at their best during the extreme weather situation.
• KEPCo’s contract with its largest supplier provided some additional benefits and protections during this event. Although we feel we had a very small portion of our power supply exposed to the extreme energy market prices during this crisis, we are still concerned about how the exorbitant natural gas prices will affect energy costs moving forward.
• Any increase in prices caused by this phenomenon has been capped on February’s billing. (See power cost adjustment description above.)
• Members’ bills should not be as high as the variable price spikes reported by some Texas customers of retail electric companies because of long-term, stable resources and power supply contracts between KEPCo and its suppliers on Bluestem’s behalf. Additionally, our situation is different than Texas. Texans’ electric bills were compounded due to the fact they are deregulated at the retail level, which means many consumers have chosen to pay wholesale prices for their power. This approach can be cheaper during good weather but spikes when there is a high demand for electricity and generation capacity shortage, such as what occurred in February.

• It will take some time for SPP to finalize all the costs associated with the February energy emergency crisis. Bluestem will deal with the costs on a monthly basis and communicate with our members the cost effects from this February event.

• Members are encouraged to contact our office to review payment assistance resources and discuss payment arrangement options.
  • Low Income Energy Assistance Program (LIEAP) is a federally funded program that helps eligible households pay a portion of their home energy costs by providing a one-time per year benefit. Applications are due by March 31, 2021.
• Budget Billing is an available payment option to help keep monthly electric bills predictable and manageable. This free option averages electric use over a 12-month rolling period to avoid big fluctuations in monthly bills. Budget bills are trued up once a year on the June bill.
• Bluestem encourages members to sign up for the SmartHub App where they can closely monitor their daily electrical usage.