Taking a step toward holding down Kansas electric rates, a panel of state legislators on Tuesday backed a proposal limiting Evergy from recovering electric transmission costs from consumers that supporters say will save ratepayers millions.
The House utilities committee approved a bill Tuesday prohibiting Evergy – the state’s largest publicly owned utility – from recouping expenses related to building transmission facilities that are an outgrowth of its own planning for local projects.
Evergy, under the bill, would need to seek recovery of those costs from the Kansas Corporation Commission through a rate case, which can be lengthy and costly.
The bill doesn’t affect transmission charges resulting from projects directed by regional transmission organizations such as the Southwest Power Pool or the Federal Energy Regulatory Commission.
The committee’s action was significant because it is the first step toward changing a state policy that has been in place for 20 years.
There is raging debate over whether the bill would save ratepayers money and what it potentially means for the utility company’s fiscal health.
Supporters of the legislation say it could save ratepayers $9 million a year, while Evergy said the bill puts the company at risk of a credit downgrade and higher borrowing costs that will offset any projected savings.
“As currently drafted, the bill repealing the transmission delivery charge is punitive and sends a negative signal about investing in infrastructure in Kansas,” Evergy spokesperson Gina Penzig said in a statement.
“It risks electric reliability and will drive higher electric costs – not savings – for customers. We don’t think those are anyone’s goals,” Penzig said.
Lawmakers were divided on the legislation.
“One of the most frequent contacts I have from constituents has to do with utility bills,” said Democratic state Rep. John Carmichael of Wichita.
“It is becoming increasingly apparent that our investor-owned utility is generating profits for its shareholders by spending more and more and more money on capital improvements,” he said.
“We have to get control over this somehow.”
Republican state Rep. Pat Proctor of Leavenworth saw the bill differently.
“I don’t like this bill,” Proctor said.
“I feel like it’s a bunch of people ganging up on one business,” he said.
“But businesses are getting crushed by the cost of energy,” he said, “and I feel like this one company is not negotiating back.”
“They’re kind of dug in.”
Proctor said he hopes the full House never takes up the bill, but he voted to get the legislation out of committee in hopes a deal could eventually be reached.
The bill has the support of the KCC, which estimated that the legislation could save Evergy’s customers in central Kansas $9 million in electric rates and about $1.6 million in electric rates for Evergy customers in Kansas City.
At issue is what’s known as transmission delivery charge, which is passed onto ratepayers as part of their electric bill.
For customers of Evergy – the only utility affected by the bill – its means about $17.29 per month on average in central Kansas and about $8.09 per month on average in the Kansas City area.
Currently, a utility company can modify the charge – without oversight of the KCC – whenever a utility’s proposed change in transmission costs is approved by the Federal Energy Regulatory Commission.
The bill brings some of the increases – those related to Evergy’s internal processes and local planning – within the jurisdiction of the KCC.
Since Evergy merged with Westar in 2018, the transmission delivery charge has increased about 8%, utility spokeswoman Penzig said in an email.
The charge adjusts annually, and, since the merger, it has decreased two times and increased three for central Kansas customers, Penzig said.
The transmission delivery charge has decreased four times and increased once for Evergy’s customers in Kansas City.
The result, she said, has been a net decrease for Kansas City customers and a net increase for central Kansas customers.
Transmission investment, she said, helps keep electricity in Kansas reliable by enabling investment to replace aging lines.
More than 98% of the local reliability projects target lines that were built more than 40 years ago, Penzig said.
“Kansas isn’t alone in recognizing the importance of these investments,” Penzig said.
“Every state that borders us has a way to recover transmission costs,” she said.
“These mechanisms encourage investment that keeps power reliable, which attracts business investment.”
However, critics say Evergy is driven to make transmission investments knowing that it can get a good return on its investment.
The company gets a 10.3% return on equity investment for transmission lines built under the jurisdiction of the Federal Energy Regulatory Commission.
It would get up to a 9.3% return on investment for local transmission projects that would now be governed by the KCC under the bill.
The KCC estimates that between half to two-thirds of the current transmission delivery charge would be shifted to KCC review if the bill passed.
“Investor-owned utilities are rewarded for spending money,” said Paul Snider, the lobbyist for Kansans for Lower Electric Rates.
“They can’t incent you to use more energy per se to generate earnings,” Snider said.
“The way they generate earnings is by increasing capital,” he said.
“The only way really for utilities to control an increase in revenue and generate shareholder earnings is by increasing their capital spend,” he said.
Chuck Caisley, senior vice president of public affairs for Evergy, said the company was only responding to policies at the federal and state level aimed at encouraging construction of transmission lines.
“We do what we’re incentivized to do like any rational person or any rational business,” he told lawmakers during a hearing.
Snider dismissed the Evergy’s claims of being hurt financially by the bill, noting that the KCC projected the $9 million savings.
“They’ve cried wolf so many time about consumer protection no believes them,” Snider said.
“They’re a $14 billion market cap company. I don’t see how this is going to bankrupt them,” Snider said.
Snider’s group has been working at the Capitol for the last several years trying to get the Legislature to address the state’s electric rates, which are among the highest in the central United States.
However, earlier this month, the KCC briefed the House utilities committee on federal data showing that average Kansas electric rates declined 0.19% from 2016 to 2021.
Kansas was only one of two states in the Midwest that saw a decline in average electric rates during the six-year period for which data was collected from the Energy Information Administration.
The only other state with a decline was North Dakota, which saw average rates fall 3.24%, according to the report made to the utilities committee.
