(Updated to include new estimate of the cost of building the gas plants)
State utility regulators on Monday cleared a path for Evergy to build two new gas plants that will lead to rate increases in the future to cover the cost of construction.
The Kansas Corporation Commission approved Evergy’s proposal to build two gas-powered plants – one in Reno County and another in Sumner County – totaling $3.2 billion.
It also approved Evergy’s plan to build a new $228.1 million solar facility in Douglas County.
The gas plants are expected to mean an 8.6% rate increase for the 738,000 customers served in Evergy’s central area, which includes Topeka, Manhattan and Wichita.
Those rate increases would not start until the plants are operating in 2029 and 2030. The Sumner County plant is expected to start operations in 2029. The Reno County plant is not expected to start operating until 2030.
However, regulators gave the utility the ability to recover interest and carrying costs for construction of the new gas plants through a line item added to customers’ bills, which could range from 0.58% to 3.82% of the bill.
Regulators said the additional charge, approved by the Legislature in 2024, should reduce overall project costs by minimizing the amount of money used for construction to be included in customer rates.
The line-item charge can be imposed no sooner than 365 days after construction of the natural gas plants begins. The charge could be periodically increased but not more than every six months under the proposed settlement agreement.
“Perhaps it’s an overstatement that I agonized over this case, but I definitely have a lot of complex and competing impressions of the request that we got from Evergy,” said KCC Chair Andrew French.
“The magnitude of the issues in this case were unique as compared to other cases,” he said. “We get a lot of very big and impactful cases, but this one was particularly impactful from a customer affordability and a customer reliability standpoint.”
The gas plants will “come at a very high capital cost,” French said, but consumers will get a lot of “reliability value” out of the plants for many years to come.
While the commission found that the gas plant project was “reasonable, reliable, and
efficient,” it still had concerns over the costs and rate impacts.
Regulators acknowledged that while Evergy had improved its regional rate competitiveness in its central territory, they said much of that was attributable to the five-year rate moratorium following the merger of KCP&L and Westar.
Since the rate moratorium ended, Evergy Kansas Central has filed rate cases on average every other year, the commission said.
“The commission is troubled by the frequency and magnitude of rate cases and strongly encourages Evergy to focus on pacing investment to better align with load growth and mitigate large rate increases,” the commission said in its order approving the deal.
“The commission understands new investment is needed to support reliability and economic development in Kansas,” the commission’s order said.
“However, affordability must be a major priority and proactively pursued as Evergy addresses a seemingly endless list of ‘justifiable’ projects and initiatives.”
The commission said it will expect Evergy to meet future capacity needs by demonstrating its serious consideration of less capital-intensive options.
Nevertheless, the commission found that despite the higher costs that accompany reliability, the gas plants were inn the interest of current and future ratepayers.
Evergy said the plants were justified because it was confronted with increased demand and aging infrastructure, among other things.
The gas plants, company officials have said, would be the first base load power plants that Evergy has constructed since the Wolf Creek nuclear power plant in Burlington came on line in 1985.
Last year, Evergy held out a promise to state lawmakers that more capital flowing into the state for building utility infrastructure would foster economic development, something a bill enacted by the Legislature was intended to do.
In the last three years, 47 projects have located in Evergy’s service area, bringing 12,000 jobs and $7.3 billion in investment, company officials said in 2024.
The company has more than $13.5 billion in investment and projects that could move to Kansas in the next five years.
“We’re pleased the KCC approved the proposed two new gas plants and a solar plant that will help ensure reliable electricity for our current customers and for the region’s growing energy demands,” Evergy spokesperson Gina Penzig said.
“Kansas and Missouri are experiencing record economic growth, and today’s predetermination order affirms that the plants are needed to serve customers and are an efficient way to meet the growing demand.”
Opponents of the gas plant, including heavy volume electric users, said the company’s proposal was based on speculative demand and not selecting alternative plans that would be more efficient, such as increased battery storage.
The commission concluded that demand for natural gas is well supported and that battery-storage is not a one-to-one replacement for the gas plants and would not offer the same energy reliability.
“The overwhelming weight of the evidence suggests the (gas plants) will be extremely
reliable, compared to other generation resource options,” the commission said.
“While the commission understands and shares concerns about the capital costs of new (gas plants), they will undoubtedly improve the reliability of Evergy’s generation fleet.”
The Kansas Industrial Consumers Group, which is made up of high-volume electric users, said it was disappointed in the commission’s decision. The KIC noted that only Evergy and the KCC staff supported the proposal.
“Although Evergy ‘estimates’ the costs of the two gas plants to be $1.6 billion – the final costs of these gas generation plants are unknown,” the group said in a statement.
“The required gas infrastructure to provide natural gas to the plants does not exist and must be constructed at an unknown cost,” the group added.
“The cost of firm gas transportation that will be required to transport gas to the plants does not exist and has an unknown cost.”
Nevertheless, the commission found that it was in the public interest for Kansans to be served by a reliable and affordable electric grid.
“A reliable grid includes a diverse portfolio of generation with certain attributes, including flexibility, availability, and dispatchability,” the commission order said.
“Even the opponents of the (gas plant) settlement agree that more generation capacity is needed in coming years,” the commission said.
“Without more generation, Evergy customers face reliability concerns resulting from an aging generation fleet, increasing load, and potentially more extreme weather.”
The KCC said it would review the “prudence” of all costs incurred to construct the plants once Evergy seeks to add them into rates.
The agency said if project costs exceed estimates, Evergy would bear the burden to demonstrate those costs are appropriate to recover from ratepayers.
The commission said staff would audit all project construction costs for accuracy, necessity and adherence to the contract terms, which may result in disallowances of cost recovery.
The project still needs approval from the Missouri Service Commission because 50% of the ownership in the two gas plants would be shared by Evergy Missouri West.
The cost of projects to Evergy Central in Kansas would be $788.8 million for the natural gas plant in Sumner County and a $800.52 million for the plant in Reno County.
Evergy has an application pending before the Missouri Public Service Commission similar to what the KCC considered.
Evergy has asked the Missouri regulators to approve allocating 50% of each gas plant proposed in Kansas to serve Missouri West customers.
Company officials said they have reached a settlement agreement with commission staff and the Midwest Energy Consumers Group, indicating that the plants are needed and in the public interest to build and serve customers.
The agreement is expected to be considered by Missouri regulators in August.
“It feels like me and every Evergy customer is being forced to subsidize two multibillion dollar industries and it’s wrong,” said Billy Davies, Missouri chapter organizer for the Sierra Club.
“It looks like Missouri will follow Kansas in approving a project that not a single intervenor, besides Evergy, claims is good for our economy,” Davies said.
“If Evergy is confident in its financial projections then it should have no problem agreeing that its shareholders pay for excessive costs instead of forcing customers to foot the bill.”
