By Rebecca McCutcheon
Posted on June 22, 2018
A proposed partnership between the City of Winfield, the Kansas Power Pool and transmission operator GridLiance of Irving, Texas, will help the city finance upcoming projects and manage the risks that come with owning its electric transmission facilities.
The city and GridLiance entered into a non-binding letter of agreement Monday regarding possible purchase and development of a portion of the city’s electric system.
The purpose of the agreement is to preserve current transmission revenue and share the risk of electric transmission ownership, according to documents provided by the city.
“The city’s main goal is to make sure our long-term revenue is not depleted,” said Winfield City Manager Jeremy Willmoth.
If the agreement goes as planned, GridLiance will purchase 65 percent of the city’s electric transmission assets for $1.1 million in cash at closing, with the city retaining ownership of the other 35 percent. The partnership would result in average annual revenue of $385,000 for the city, projected over 10 years.
GridLiance has also committed to a total of $900,000 in economic development and community support funds to the city, paid out in several installments based on the transaction closing and as projects are completed. The funds can be used for any purpose.
The partnership will provide GridLiance with an opportunity to invest in transmission, which could provide additional funds to offset costs for Winfield customers and normalize the city’s revenue from transmission ownership, said Bary Warren, vice president of Corporate Development for GridLiance, in an emailed response to questions.
The catalyst for the partnership is a Southwest Power Pool-mandated project that would involve making transmission improvements from the end of Westar Energy’s coverage area to the City of Winfield’s Tie Substation, near U.S. Highway 77 and Country Club Road. This project would cost the city $3.6 million if undertaken alone, said Willmoth.
Other upcoming projects include relocating power poles and lines that cross the river due to bank erosion and building another transmission connection north of town. Willmoth said this latter project would add “another layer of reliability” to the city’s network.
The partnership will help with risk management because GridLiance will absorb all future capital risks related to Winfield’s transmission system, said Warren. Although the city has the option to invest alongside GridLiance, there is no obligation to do so.
“The city’s financial risk is significantly reduced for unforeseen impacts to their transmission assets. When a transmission outage occurs, the City retains control to get the lights back on, but GridLiance bears a significant portion of the financial responsibility,” said Warren.
GridLiance has in-house legal, compliance and administrative experts, who can “make sure our network isn’t left behind,” said Willmoth. The city currently has to contract out for these services. Not having to navigate them alone will be less risky, said Willmoth.
The city will maintain control of all its electric production assets, and operations and maintenance. Customers should not notice any change in service, and the city will still be the service provider during normal and emergency conditions, said Warren.
Having a partner to share successes and risks with “will ensure long-term stability,” said Willmoth.