City of Grand Island could be switching from coal to natural gas as its source for electric power generation.
A request for proposals is out for engineering services to consider new scenarios for power generation to Grand Island Utilities customers.
After February’s polar vortex event, which essentially caused disruption throughout the Midwest because Texas was without power, greater reliability might be needed, Utilities Director Tim Luchsinger said.
“We did a very good job on operation. We found we had a very good balance of equipment here. We learned some lessons. But it got us to thinking, there has to be a value to being reliable,” Luchsinger said. “We need to somehow factor that into the equation, rather than just looking at what the cheapest cost is.”
The region has been transitioning during the last few years from coal generation to natural gas, he said.
“This primarily involves getting rid of the big base load units like we have at Platte Generating Station and moving to quick-start units, which can start in minutes rather than hours,” Luchsinger said. “It might take PGS 20 hours to start up versus 15 minutes.”
Grand Island Utilities has been looking at replacing a smaller combustion turbine unit for the last four years.
The unit, installed in 1968, is primarily fueled by natural gas but can also use fuel oil.
This was the case in February when natural gas was unavailable.
The replacement project was to go out to bid in 2020, but due to pandemic-related concerns it was canceled.
“Starting with this smaller unit we want to replace, we want to have an outside firm come in and help us look at this, and maybe be able to do a more objective analysis of what we’re thinking about doing,” Luchsinger said.
A switch to natural gas would not cause a spike in rates, he said.
Any increases would be mitigated through capital financing, Luchsinger said, and the result would be a more competitive utility rate.
“We don’t want to do what we keep on doing and find out the rates are going up because we aren’t staying competitive,” he said. “The intent would be to hold and have a minimal increase on what we have to do for rates, but make that more cost-effective in the long run.”
Luchsinger added, “What may appear to be the cheapest rate up-front may cost you in the long run.”
The average rate is 9 to 10 cents per kilowatt hour for Grand Island customers.
“If you look nationally, we have very good rates,” he said. “There’s people paying 14 or 15 cents out there.”
This rate has been consistent for nearly 15 years.
“What rate increases you may see has to do with what the actual cost of power is,” Luchsinger said, “but as far as our base rates, we haven’t done anything with that for quite a while.”
Different sources for power generation in Grand Island are already in the works.
A 15-megawatt wind project will be online in a few years, and the city gets some power from its solar array, which was built in 2018.
“I think some utilities out there learned the lesson that you just can’t go with the cheapest thing,” Luchsinger said. “There’s value to paying some extra money to make sure something is more reliable.”
There is no rush to implement any changes, he said.
“We’re looking at what we feel are long-term solutions,” Luchsinger said. “I’m still not sure where things are going to go with COVID, with the economy, but we want to make sure we’re not getting into something before we have to. We’ll take our time on this.”
Proposals are due on April 29. Possible costs for the power generation study have not been disclosed.