(Updated to include comment from Panasonic)
Panasonic’s demand for energy to supply its new $4 billion plant in De Soto could force Evergy to seek a rate increase to recover the cost of investments needed to power the electronic vehicle battery manufacturer.
As Evergy seeks a rate increase from the Kansas Corporation Commission, the utility also is asking the agency for permission to return in a year for an abbreviated case, partly to raise rates to pay for the infrastructure needed to supply Panasonic.
In its filings with the KCC, Evergy officials reveal that Panasonic’s demand on the grid is equal to a small city and about double the size of its largest customer in central Kansas.
Further, Evergy officials said the arrival of new development – something that Laura Kelly has accentuated during her term as governor – puts new demand on the power system and poses challenges for how it can be served.
“From a generation and resource planning investment perspective, Kansas is currently experiencing some of the most expansive and exciting economic development opportunities in many years,” Evergy Vice President of Regulatory Affairs Darrin Ives said in testimony filed with the corporation commission.
“However, these development opportunities coupled with recent market changes, are creating new resource adequacy challenges for Kansas,” Ives said.
“Evergy stands with Kansas to plan for and meet the current and future energy needs of the state,” he said.
“There is a need for creative solutions to ensure there is adequate capacity and energy available to serve current and future Kansans,” Ives said.
The utility says its capacity will be affected by the Southwest Power Pool’s decision to increase its generation reserve margin requirement for its members – or in other words, it must have a sufficient cushion to keep the lights on if it loses a generating unit.
The abbreviated rate case is needed for several reasons, including investment in renewable energy sources and the possibility that it has to plan for increased costs related to the decommissioning of the Wolf Creek nuclear power plant.
But Panasonic and the state’s economic development demands are weaved throughout Evergy’s filings with state regulators.
An official from Panasonic said in a statement that the company is making a significant investment in upgrading Evergy’s infrastructure to be able to serve the factory.
He said Panasonic will pay for all utility costs immediately attributable to it operations. He noted that other improvements being made will benefit all Evergy customers and system reliability as a whole.
“While Panasonic does not have visibility into Evergy’s rates for the state as a whole, we do know that Panasonic is making a significant investment in upgrading Evergy’s infrastructure to be able to serve the factory,” said Carl Walton, vice president of strategic initiatives and facilities for Panasonic Energy of North America.
“We are grateful to Evergy and our other regional partners helping to bring the plant to life and look forward to ensuring the benefits of Panasonic’s presence in the region are widely felt, including through the growth of affordable, reliable, and sustainable energy infrastructure,” he said.
The state Commerce Department did not respond to a request for comment.
Evergy executives said in their filing that the demand for energy isn’t just Panasonic, but also the satellite companies that will locate nearby and the people who are expected to move to western Johnson County to work at the plant.
“All of this economic development is great for (Evergy Kansas Central’s) growth and the
growth of its communities, but it does create near-term challenges from a resource
adequacy perspective,” said Kayla Messamore, Evergy’s vice president of strategy and long-term planning.
Messamore said in her testimony filed with the commission that there is some immediacy needed with the Panasonic project.
She said construction of the Panasonic project is on a “very aggressive schedule” with its electric needs starting to ramp up in 2024 and needing full load requirements by 2026.
“There is urgency to procure capacity and energy to fulfill the expected energy usage schedule. Under normal operating conditions this timeline would present a significant challenge,” she said in her testimony.
“Given the supply chain constrained conditions of the current market, it is nearly impossible
to design, develop, construct and commercialize a resource to fulfill Panasonics needs
within their required timeline,” Messamore said.
“Utilizing existing resources will be key to successfully meeting Panasonic’s demand requirements over the next few years,” she said.
And it’s not just Panasonic, either.
Officials say Evergy Central, which makes up most of Kansas outside the Kansas City area, continues receiving inquiries for serving proposed data centers, new manufacturing plants and hydrogen production across its territory.
“While not all of these projects will ultimately materialize, they represent hundreds of megawatts of potential loads which (Evergy Kansas Central’s) currently planned resource mix are not sufficient to serve,” Messamore said.
Evergy didn’t define the demand precisely but said that existing resources will not be sufficient to fulfill more demand in addition to Panasonic.
“The existence of incremental economic development potential highlights the importance of leveraging all available and currently operational resources to meet customer needs first prior to having to rely on new generation builds which could introduce schedule and pricing uncertainty for potential new customers.”
Chuck Caisley, senior vice president of public affairs for Evergy, said Panasonic would benefit the entire system by helping reduce overall costs because of its sheer size.
He said the more power that’s sold puts more downward pressure on electric rates.
Ultimately, Caisley said electric rates would be lower than they would otherwise have been in the long term without Panasonic.
“Any time somebody comes on the system, that is a cost everybody bears,” Caisley said.
“In this case, this particular company is going to use power 85% to 90% of the time pretty consistently, so the value of all those kilowatt hours on the grid will ultimately help keep rates lower for everybody,” he said.
“Economic development in general is a very good thing,” he said.
Caisley said the nature of economic development has changed fundamentally within the last three to four years as the projects get bigger and consume more energy.
He said it’s driven partly by efforts to bring back certain types of manufacturing from overseas, whether it was because of the pandemic or geopolitical concerns.
He said Evergy has seen robust economic development for several years now, but it’s the mega projects that potentially present a challenge.
He stressed that the company can fulfill the demands it now faces.
“These projects are just a lot bigger than what we’ve seen over the last decade,” he said. “We have the generation capacity necessary to meet these projects.”
“If all of them in the pipeline were to hit and hit and hit at the same time, we would not,” he said. “But they all don’t choose to locate in Kansas.
Ryan Mulvany, who oversees construction, operation, and maintenance for Evergy, detailed the construction work that will serve Panasonic.
Evergy is building two new substations, upgrading three existing substations, and extending or rebuilding about 31 miles of transmission lines.
Construction started in the first quarter of 2023 and is expected to be complete by the fourth quarter of 2025.
Mulvany said the distribution-related costs will be recovered through rate base additions typically addressed in rate case proceedings.
Asked if Panasonic should bear the cost of the upgrades to serve its plant, Mulvany said the company has “the obligation to pay for a part of the upgrades,” such as investments required to interconnect its load.”
Evergy Kansas Central “has the obligation to serve the load and ensure reliability of the power system,” he said.
“Due to the large load addition, system upgrades will be necessary to ensure reliability for all customers,” he said in testimony filing with the KCC.
He said Evergy intends to negotiate a special contract with Panasonic and file an application for approval with the commission for a special rate for the associated load-related investments.
While the substation is constructed for serving Panasonic, “the facilities will result in increased reliability and increased redundancy for other customers and will allow for additional load growth in the area,” Mulvany said in his testimony.
Caisley said the work to supply Panasonic was not “an economic giveaway,” something the company has come under fire for because of the millions of dollars its receiving in tax incentives to come to Kansas.
He said Evergy is obligated to provide service to any business that locates in its service area and ensure the sytem meets its needs.
“That is a systemwide cost,” he said. “That is a cost of expanding the system that everybody pays for.”
