Evergy President and CEO David Campbell on Monday made a rare appearance before the Kansas Corporation Commission to make the case for a settlement agreement that calls for raising electric rates in central Kansas by $128 million.
Campbell faced questions from the commission about how the utility balances the need to upgrade aging infrastructure to ensure reliability of electric service with the need to keep electric rates affordable, especially for homeowners and small business.
The commission is considering a rate increase for Evergy customers in the utility’s central Kansas customer area, about two years after regulators approved a 4% rate increase for that same group of customers.
Further, the commission just agreed to allow Evergy to recover the cost of building two natural gas plants costing $3.2 billion, which will mean an 8.6% rate increase when the plants start operating in 2029 and 2030.
The rate increases affect 738,000 customers served in Evergy’s central area, which includes Topeka, Manhattan, Wichita and other communities in the eastern third of Kansas.
In the order approving the gas plant, the commission said it was troubled by the frequency and magnitude of rate cases and strongly encouraged the utility to focus on pacing investment to better align with load growth and mitigate large rate increases.
Commissioner Dwight Keen on Monday said he was “very concerned” that future increases in Evergy’s capital expenditures coupled with capital expenses required by the regional grid operator will result in even higher electric rates.
Campbell said that Evergy emphasizes affordability, reliability and sustainability, with affordability topping the list.
“We know how critical affordability is for our constituents,” he said.
He noted that 25% of Evergy’s customers struggle paying their monthly electric bill, plus he added that affordability is necessary to ensure that Kansas is competitive.
“We’re investing at levels that are lower than our peer averages, and we’ve been working hard to manage our costs,” he said.
Campbell told the commission that the utility has cut costs by about 25% since 2021, reducing expenses from more than $1.3 billion to about $950 million.
“I’ll never be the most popular CEO in the history of our company because those have been hard choices,” he said.
“We know that in a period of time when we’re making a higher level of investments, we need to be diligent about managing our costs,” he said.
Yet he added reliability of electric service can’t be overlooked either.
“The reliability of the system is absolutely critical, both day to day and in terms of the generation resources that we have available,” Campbell said.
“We need to invest to make sure we have reliability,” he said.
“We still have some generation investments that we need to make to accommodate load growth and make sure our fleet is staying up to par,” he said.
Campbell said a lot of Evergy’s transmission system is now 40 and 50 years old and is beyond its useful life.
“We can’t ignore that and ride that because that’s putting reliability of the system at risk,” he said.
As the company invests in its infrastructure, Campbell said the utility would do its best to attract new customers, which will hold down rates.
The latest $128 million proposed rate increase, which must be approved by the KCC, would mean a 9.59% overall increase for homeowners, an 8.41% increase for most businesses and a 9.23% increase for schools and churches.
Under the agreement, a residential customer bill would increase about 6.97%, or $9 per month, the company said.
Keen pressed Campbell on why electric rates are increasing at a faster pace than inflation generally.
Campbell said the new settlement agreement comes two years after the last rate case, so it’s not just one moment in time.
“We tend to be a long-term investment business,” Campbell said. “If you look from a five- or six-year perspective, we have been well under the rate of inflation.”
He said rates for residential customers are up a little under 6% from 2017 to 2024, while the general inflation rate has increased 20% over that same time frame.
During the hearing Monday, Keen took issue with an Evergy chart comparing the utility’s rates with other states.
Keen said the chart reflected rate changes from 2017 to 2024 but pointed out that Evergy was under a rate moratorium from 2018 to 2023 after KCP&L merged with Westar.
Darrin Ives, vice president of regulatory affairs for Evergy, said the chart reflected an overall downward pressure on Kansas rates during that time frame.
“We all knew going into that merger and making that arrangement (the moratorium), that we were at the top end of rates in the peer states that we were evaluating against,” Ives told Keen.
“That’s why it was so important to bring the merger into play, to bring the companies together and improve the competitiveness for Kansas,” he said.
“I am super proud of what we’ve been able to accomplish,” he said.
Keen asked Campbell about Evergy’s timing for future rate increases.
Campbell said the utility is investing at a lower level than its peers. He said Evergy’s peers are filing a rate case on average every 18 months.
He expects Evergy will be in about that same time frame, subject to further analysis.
Keen pressed Campbell to explain how Evergy balances the costs of its capital projects with ratepayer affordability.
Campbell said the company is data-driven in its analysis, tracking the inflation rate and the rate trajectory compared to inflation.
He said the company tracks how its rates compare to regional peer states from a competitive standpoint.
“We know how important affordability is. We also know how important reliability is.”
Keen asked Campbell to describe how the utility decides internally when it will file for a rate increase with state regulators.
Campbell said the company considers the timing of the last rate case, the level of investment the utility has made and the size of the gap between its authorized return on equity and what the company is actually receiving.
The longer the period between rates cases, the bigger the gap in the return on equity.
Looking forward, he said new rates will be determined as new generation facilities come on line and based on the level of investment the utility makes.
He said affordability is part of that equation.
“We try to look at it pretty rigorously and systematically based on the level of investment that we’re making, the level of investment that we need to make, but always keeping an eye towards, ‘Are we doing all that we can to make sure that that investments we’re making are needed for reliability while keeping an eye on affordability?'”
Commissioner Andrew French also raised the affordability issue, suggesting to Campbell that the overall health of Evergy is linked to the affordability of rates.
French asked Campbell the company’s overall strategy to address affordability.
Campbell told French that Evergy hasn’t built a base load power plant since the Wolf Creek nuclear power plant in Burlington came on line in 1985.
Before that, a lot of facilities came on line in the 1970s and the early 1980s.
“Ideally, you have those paced. They weren’t,” he said.
“We’ve got distribution that has a lot of aging infrastructure,” he said.
“You have to acknowledge the reality of your grid while you’re managing affordability, and you can’t fall short of that because reliability is absolutely critical.
“The worst thing that can happen is if the power doesn’t come on reliably,” he said.
“Affordability has to be part of that. We know that’s critically important for our most at-risk customers, but it’s critically important for growth and competitiveness.”
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