The City of Houston selected the Missouri Joint Municipal Electric Utility Commission as its new wholesale electric supplier. The organization will supply power under a five-year contract finalized last week as part of an agreement with 12 municipalities.
The utility commission was organized by 69 municipalities in Missouri to aggregate power purchases and it won out over three higher bids to become Houston’s new electric wholesale supplier. The city will continue to provide electricity at retail service to customers within the city limits.
“The MJMEUC proposal was good news for our community,” said Larry Sutton, city administrator. “By joining with other cities, we are able to get a very competitive price compared to the shorter term contract offered by Sho-Me.”
The change in electric supply has been in the works for more than a year. The city’s current supplier, Sho-Me Power Corp. of Marshfield – a generation and transmission cooperative tied to the state’s rural electric cooperative network – notified the city and 14 other municipalities in March 2010 that it would terminate its long-term contracts with the cities in 2013. The city’s power supply would instead be offered at a higher cost with a shorter-term contract.
In response, the impacted cities formed the Mid-Missouri Municipal Power Energy Pool, or MMMPEP, to collectively bid for electric wholesale supply and achieve greater economies of scale. MJMEUC’s bid was significantly less than the next best wholesale competitor, Ameren Missouri.
“With the cooperative announcement last year, we knew the rates were going to go up,” Sutton said. “And while rates will still go up, we have been able to moderate the impact and provide more predictable rates. By bidding together, we were able to collectively save more in our wholesale energy costs compared to what the cooperative (Sho-Me) had offered in a shorter term three-year deal.”
The city has received power from Sho-Me for more than 60 years. Under the proposed Sho-Me proposal, the city’s wholesale rate was expected to increase by 28.8 percent over the next three years. The consultants from MMMPEP cities indicate the MJMEUC bid was the lowest and best bid, providing a smaller increase of 17.2 percent over current rates during a three-year period and long rate stability with a five-year term. City rates have not increased — other than for an inflation factor — for many years.
Rates for electric consumers have increased in Missouri significantly. The state’s three investor-owned utilities have granted rate hikes from the state’s Public Service Commission over the last five years totaling about 34 percent. Rates on the cooperative systems have also risen significantly.
“Helping municipal utilities find electric supply at a lower cost than market alternatives is why we exist,” said Duncan Kincheloe, chief executive officer of MJMEUC. “Our cities created us for just this purpose, and we are pleased to have offered the bid the city and consultants found lowest as compared to some well-know energy marketers.
Sho-Me Power Corp., St. Louis-based Ameren Missouri and Westar Energy of Kansas all competed to provide power.
BMHG Engineers provided the energy consultant work for the MMMPEP group.