Electricity Markets

Louisville, Ky., Eyes Municipalization, Seeks Consultant For Study

The Louisville/Jefferson County Metro Government is seeking proposals for a municipalization feasibility study.

In early 2020, Louisville Metro Mayor Greg Fischer formally signed Louisville Metro Resolution No. 0009, Series 2020, in which the Louisville Metro Legislative Council resolved to support, among other things, a 100 percent clean, renewable electricity goal for Louisville Metro government operations by 2030.

“Louisville Metro is exploring a variety of supply- and demand-side pathways to achieve this goal, attempting to gather unbiased and decision supportive information to inform next steps to pursue this goal,” the Request for Proposals (RFP) for the study noted.

In an interview with Public Power Current, Allison Smith, Assistant Director, Office of Advanced Planning and Sustainability at Louisville Metro Government, noted that in order to achieve the 100 percent renewable energy goal, “we partnered with” the National Renewable Energy Laboratory (NREL).

In the first phase of working with NREL, “we spent about a year going through what our possible options are to reach our goal,” she said.

Smith noted that Kentucky is in a vertically integrated energy market. “We have a regulated monopoly,” with an investor-owned utility, Louisville Gas & Electric (LG&E).  

“We are not able to contract for renewable energy directly with a company. We have to go through our local utility. That really is limiting,” she said.

“NREL helped us identify what are the routes that we could get to our goal,” Smith said.

“We are now entering phase two. We’ve identified three possible routes.”

One route would be entering a virtual power purchase agreement or purchasing renewable energy credits. “That is certainly an option, but for a local government, that is purely a financial transaction, so there is some risk involved, especially with a virtual power purchase agreement, depending on how the market goes. And really that would not get us any of the local benefits that we are looking for in our transition to renewable energy,” Smith said. “We took that one off the table for now.”

A second option is to work with LG&E. Smith noted that large customers of LG&E can enter into a special contract with the utility “where they will build solar on your behalf and then that large customer negotiates a rate with LG&E that’s locked in for usually twenty years.”

Smith said that “we are working with NREL and LG&E to go through what would the criteria for this special contract have to be for it to make sense and for it to work for Metro Government. We’re talking about taxpayer dollars, so we do have to be financially responsible with that while still meeting our goals.”

The third option is municipalization.

Louisville Metro has identified the possibility of pursuing a partial municipalization of the Louisville Gas & Electric-owned distribution network which serves some or all of the municipal electric load. Louisville Gas & Electric is a subsidiary of investor-owned PPL Corp.

This partial municipalization would involve creating a new municipal electric utility to provide electricity service exclusively to municipally-owned and operated buildings.

In order to bring this partial municipalization into reality, Louisville Metro would need to pursue an “overbuild” of new, municipally-owned electric distribution infrastructure that will co-exist on top of LG&E’s existing distribution infrastructure while not being electrically connected, the RFP said.

This new distribution network would serve some or all municipal electric load with clean energy. This pathway would also involve connecting the new distribution network via a short, high voltage transmission line to the Midcontinent Independent System Operator, “and procuring clean, affordable and reliable electricity through existing market mechanisms (e.g., spot or day-ahead markets) and/or long-term power purchase agreements,” the RFP said.

Overall, the consultant will organize a partial municipalization cost analysis into two major demand scenarios:

  • Scenario “All:” Consultant will create an estimate of the expected cost of service for a scenario in which all municipal buildings are served by the new municipal electric utility, regardless of their location and its impact on cost. 
  • Scenario “Optimal:” Consultant will work with Metro Government at the outset of the project to develop a scenario in which a pragmatically determined, cost-optimal portfolio of municipal buildings are served by the new municipal electric utility based on their relative location, likely leaning towards a portfolio of buildings which is more geographically concentrated.

The RFP is available here.