June 24, 2024

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Kansas residents to see spike in natural gas bills

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Kansas residents over the last few months have seen a massive spike in electric rates — and will shortly be seeing their natural gas bills do the same.

Kansas Gas Service, which has 588,026 residential customers in Kansas and is the state’s largest natural gas provider, reports the year-over-year “per-unit” cost of natural gas has increased from $5.3034 per unit in September 2021 to $10.2793 per unit for September of 2022.

By law, this is a pass-through charge to consumers, meaning Kansas Gas does not profit from the cost of gas but only passes along the price.

While “Winter Storm Uri” had some effect on these prices, the increase is largely due to other factors, including an increase in demand due to record heat, natural gas storage in the U.S. well below the historical average — reducing supply even as demand increases — and to some degree the war in Ukraine.

However, that is a minor factor domestically as — as CBS News reported in May — almost all the world’s liquefied natural gas supply is under contracts that may be decades in length, and even though the Biden Administration pledged to send more gas to Europe, there’s very little available to actually sell without increasing production — which is lagging behind historical averages.

Additionally, consumption is expected to continue to increase going into fall and winter.

Natural gas prices contribute to electricity spike, but not the only factor

The increase in natural gas prices is a contributor to the spikes in electric rates Kansas customers have seen this summer, as the impact ripples across energy and manufacturing sectors.

According to Energywire, natural gas prices have risen faster this year on a percentage basis than crude oil, gasoline, or diesel.  

Gas is the largest single source of electric generation in the U.S. In all, gas accounted for about 38% of power generation in the U.S. last year, according to the U.S. Energy Information Administration.

As the Sentinel reported in July, Evergy, the largest for-profit electric company in Kansas, recently raised rates for nearly every customer in the state by more than 20% — without telling them.

Electric utilities in the region are permitted by regulatory authorities to use the Retail Energy Cost Adjustment, or RECA, to recover the cost of power generation fuel and the costs of purchasing power.

On July 1, 2022, Evergy Kansas Central increased its fuel and purchased power costs by 52%, from $0.028918 to $0.043956 per kilowatt hour, and neither the Kansas Corporation Commission — the entity tasked with regulating energy companies in the state — nor Evergy advised Kansas retail ratepayers of the change. 

The cost of fuel was hardly the only factor in the price increases, however.

Staff at the Kansas Corporation Commission, which regulates for-profit utilities in Kansas, raised concerns about Evergy’s propensity to exceed its allowed capital expenditure budget — with the costs passed on to consumers in the form of higher electric rates.

“Evergy’s ratio of capital expenditures to depreciation and amortization has grown to a level that is 7% above its regional peers,” the report reads. “Additionally, Evergy’s 2022-2024 capital expenditure projections grew 8.70% over its 2021-2023 projections, whereas the capital expenditure projections of Evergy’s regional peers grew by an average of 3.38%.

Taking those concerns into consideration, the KCC, on Sept. 15, issued an order requiring the company to explain its capital spending plan — publicly.

And on Sept. 8, the KCC granted public utility status for NextEra Energy to build a multi-million dollar transmission project to move power generated at Wolf Creek Nuclear power plant out of state.

At a special meeting on Aug. 29, 2022, the KCC unanimously granted a “certificate of convenience and necessity” to NextEra Energy Transmission Southwest — which enables NextEra to do business as a public utility in the state.

If granted final approval, the line would send electricity that was originally intended to serve the Wichita and Kansas City metro areas to customers in Missouri, but Kansas customers will have to pay for the transmission line via higher electricity rates.

All while already paying some of the highest electric rates in the country.

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