February 27, 2024

Keeping Media and Government Accountable.

Is KCC using biased analysis to justify higher electric rates?

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The masthead on the Kansas Corporation Commission (KCC) website declares it is serving the people of Kansas, but testimony indicates it is serving the interests of Florida-based NextEra Energy and the Southwest Power Pool.

Written testimony presented to the Kansas Corporation Commission makes clear the KCC is relying on claims made by the Southwest Power Pool to determine whether a transmission project would benefit SPP and NextEra, the company building it.  But they should be doing their own research to determine if Kansas ratepayers would benefit.

Earlier this month KCC staff recommended approving NextEra’s request to be granted a “Certificate of Convenience and Necessity” for a power transmission project and declare NextEra Energy, Inc. a “public utility,” giving the developer the power of eminent domain — the right to condemn private property from landowners who might not want to sell. NextEra would then build an 89-mile, high-voltage transmission line — called the “Blackberry Project” from Wolf Creek Nuclear Power Plant, crossing farms and ranches in Coffey, Anderson, Allen, Bourbon, and Crawford counties before stretching to a substation in Jasper County, Missouri. The project would send electricity originally intended to serve the Wichita and Kansas City metro areas to customers in Missouri — with Kansas customers footing the bill.

According to testimony from Jeff D. Makholm, managing director at National Economic Research Associates, the problem is that KCC staff relied entirely on SPP’s own analysis rather than conducting their own.

“Staff has relied on SPP’s benefit modeling, and resulting SPP ‘Benefit Metrics,’ to support its conclusion (having done no independent analysis regarding whether Blackberry meets the ‘necessity’ or ‘just and reasonable’ tests under Kansas statutes),” Makholm said. “For its part, in presenting those ‘Benefit Metrics’ driving Staff’s recommendation, SPP used methods to evaluate new transmission projects within the SPP region that (as SPP itself states), have not changed since 2012.”

The justification for the multimillion-dollar project is congestion on the powerlines leading from major wind farms in western Kansas. However, Makholm testified that the Blackberry project would actually exacerbate the issue, while also increasing prices for Kansas consumers who already have some of the highest rates in the country.

“Neither SPP nor the Staff examined either (a) the growing transmission burden on Kansas ratepayers or (b) Kansas’ predicament of being rich in wind resources but being incapable yet of transmitting the benefit of such resources to other states,” Makholm wrote. “In other words, Staff relies on SPP, and SPP has neither the mandate nor the model to deal with Kansas’ pressing wind export predicament.”

According to Makholm, the SPP’s modeling procedures will result in continuing transmission charge increases for Kansas ratepayers.

Moreover, by relying on SPP’s analysis rather than conducting an independent review, Makholm said the KCC is failing to abide by Kansas law.

“The KCC may well decide that, in the interests of overall regional benefits, it would approve a project that resulted in a projected increase in Kansas costs not justified by Kansas production costs savings,” Makholm said. “But I understand that approach would require that the KCC not apply Kansas law (which requires the KCC to determine that Blackberry is a necessity under Kansas law). At a minimum, the KCC must have the facts regarding Kansas-specific impacts. Instead, the KCC is being asked to approve Blackberry based on overall SPP metrics; not Kansas impacts in a situation where Kansas metrics may well differ.”

Wind plants shutting down amid reduced demand

It is unclear if the projected congestion issues will persist in any event, as two Siemens wind turbine manufacturing plants in Hutchinson, Kansas, and Fort Madison Iowa are shutting down with more than 250 employees losing their jobs.

The Hutchinson News reports that the blade manufacturing plant in Iowa will close first, in June, followed by the Hutchinson nacelle manufacturing plant in July. Siemens is calling the closures “hibernation” indicating the closures might be temporary, but would not give a time frame for restarting but is awaiting changes in “market conditions.”

Federal subsidies on windfarm development expired at the end of 2021.

‘Necessary’ determination required for eminent domain

While the SPP has declared the project “necessary,” state law requires the KCC to agree, something Jim Zakoura of Kansas Industrial Consumers Group and Kansans for Lower Electric Rates said is unclear.

“Power has moved from Wolf Creek since 1985,” Zakoura said in a phone interview. “So it seems to me that it’s hard to make the case that it’s a necessity to build this line because what might be necessary perhaps for the overall SPP, isn’t necessary for Kansas.”

In 2020, the last year for which figures are available, Kansas alone produced more than 54.5 million megawatt-hours of electricity.  On any given day, Kansas can produce about 20,000 megawatts of power, which is almost half of what the entire SPP used — 43,661 mw/h — at the peak of the 2021 winter storm — and provides about a third of the total power pool available to the SPP.

Zakoura’s group — along with several industrial ratepayers — has filed a brief with the KCC seeking to intervene in the case and disputing that it is “necessary” for Kansas.

The KCC however — in an almost unprecedented decision — limited their ability to intervene claiming that since retail rates were not directly at issue, KIC had no standing to challenge other issues with the project.

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