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Education

Shawnee Mission School District Hit With $1.6M Gas Bill After February Cold Snap

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Shawnee Mission Post
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SMSD has bought natural gas from third-party vendors for years, typically saving money, district officials say. But a February winter storm incapacitated much of the country, heightening demand and sending prices skyrocketing, resulting in the eye-popping bill.

The district is gathering information on why its bill spiked so much.

The Shawnee Mission School District has been hit with a $1.6 million energy bill for the month of February.

That single month’s total is nearly three times what the district budgeted for natural gas costs for the entire 2020-21 school year.

At Monday’ night’s board of education meeting, SMSD Chief Financial Officer Russell Knapp revealed that the district had received the invoice from Symmetry Energy Solutions, a third-party natural gas vendor based in Houston.

“We just got that on Friday, and so we will be trying to get more information on that,” Knapp told the board. “We’ll take a look at that in the next week or so, and hopefully some good news will come from that.”

In an interview Tuesday morning, Knapp told the Shawnee Mission Post that the district was “gathering more information” from Symmetry about why the district’s bill spiked so much.

“We’ll get the agreement, see what it says about what allows them to increase the rate to this extreme,” Knapp said. “But I think this was an anomaly.”

February saw record-low temperatures across much of the central U.S., which prompted rolling blackouts — including in Johnson County — as utilities and energy companies dealt with unprecedented spikes in demand and supply hampered by the extreme cold.

Knapp said money saved from ongoing staff vacancies created, in part, by the COVID-19 pandemic could help cover the cost of February’s bill. But if not, he said, the extra expenditure would be paid for out of the district’s reserve fund.

Knapp estimated that the district’s current cash balance is about $20 million.

“We have adequate reserves,” Knapp said. “And we maintain those reserves for these types of situations.”

KCI Airport also impacted

On Monday, Kansas City, Mo., Mayor Quinton Lucas called out Symmetry on Twitter for sending an unusually high bill to Kansas City International Airport for the month of February.

“Kansas City certainly understands the energy industry challenges from this winter, primarily originating in the southwest,” Lucas said in a follow-up tweet. “We do not believe, however, those costs should be disproportionately assessed to our MoKan flying public. @KCMOManager is on the case.”

The Shawnee Mission Post reached out to Symmetry on Monday night via email with questions about SMSD’s bill and has yet to receive a response.

On its website, Symmetry describes itself as a “leading energy supplier providing over 1 trillion cubic feet of natural gas to more than 100,000 customers in over 30 states.”

The practice for ‘many years’

SMSD has been buying gas from third-party vendors for years, Knapp confirmed, as a way to cut the district’s energy costs.

SMSD records going back to 2012 show the district has bought natural gas services from both Kansas Gas as well as out-of-state companies on a yearly basis.

These annual budgeted totals have typically fallen between $600,000 and $800,000 a year.

Knapp explained that the district has been in the practice of contracting with a third-party vendor like Symmetry on the open market in order to buy large quantities of natural gas that is then directed into district facilities by local utility Kansas Gas.

“It’s been for many years a savings to us on energy bills,” Knapp told the Post.

In July 2020, the board of education unanimously approved a budget item allowing for the purchase of natural gas services from both Kansas Gas and Center Point Energy for a total of $600,000.

Center Point was Symmetry’s predecessor.

On Symmetry’s website, a press release shows that Center Point was sold to a private equity firm, Energy Capital Partners, in June 2020. Following that deal, Center Point was rebranded Symmetry.

SMSD also used Center Point for natural gas services in 2019. Prior to that, the district signed yearly deals with Kansas Gas and Dallas-based Atmos Energy dating back to 2012.

Other districts and businesses in same situation

It’s a common practice for public school districts to deal with third-party vendors to buy gas directly on the open market instead of or in addition to buying from utilities, says Blake Baxter, an industry consultant with Wisconsin-based Blue Edge Energy.

Baxter advises dozens of districts in Wisconsin on buying natural gas. He said in normal times such deals often save districts money. But when extreme volatility hits, like this past February, exorbitant bills can hit buyers hard.

Notably, that happened to residential customers in Texas’ deregulated energy market after February’s cold snap. Prices fluctuated wildly and stories abounded of customers getting socked with energy bills that, in some cases, topped $10,000.

“The contracts these companies offer are like cell phone contracts,” Baxter said, of third-party natural gas vendors. “There are very few protections. In a low-price environment, they may save you money. But in this type of event like in February, it can expose the buyer to extremely high prices.”

Baxter said a suburban Milwaukee district he works with typically has monthly energy costs of $50,000 but got hit with a $200,000 bill for February.

The Kansas Corporation Commission, which regulates the state’s energy industry, said it had not heard from any public school districts facing high energy costs following February but that some businesses in the state that use gas marketers to buy energy are facing similarly steep bills.

“The KCC does not have any regulatory authority in these matters. Our staff continues to explore ways to help, but there are no existing laws to support it,” Linda Berry, the KCC’s director, told the Shawnee Mission Post in an email.

Baxter said he advises districts to know the contracts they sign with third-party gas companies and urges them to sign deals that lock in fixed utility rates during winter months, when prices typically go up.

Still, he says, over the long-term, despite February’s mayhem, such deals have saved money on energy costs for the Wisconsin school districts he consults.

“This was an exceptional event, what we call a ‘black swan,'” he said. “If you have the right contract, you can still weigh your pluses and minuses and understand what the risk truly is.”

For his part, Knapp also said he thinks this is a “one-time event” and that the strategy of purchasing gas from a third-party vendor is still ultimately an economical one for the district.

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