If the Kansas Corporation Commission — the entity tasked with overseeing utilities in the state of Kansas — has its way, people who generate their own electricity would still have to pay a minimum bill to the electric company to pay for power they don’t use.
Under current state and federal law, electric utilities are required to purchase — or at least credit — anyone, generally a homeowner, who has installed solar panels — or even the occasional wind turbine — and generates more power than they use for any excess sent to the grid.
House Bill 2227 — which the KCC staff opposes — would expand that to “third-party power purchase agreements. These “PPAs,” according to the U.S. Department of Energy, are an arrangement in which a third-party developer installs, owns, and operates an energy system on a customer’s property. The customer then purchases the output of that system for a given period of time.
House Bill 2227 would authorize any retail customer of a public utility to enter into a power purchase agreement with a renewable energy supplier to install an eligible renewable energy generation facility on the premises that is owned, operated, leased, or controlled by that retail customer.
This — at least in theory — allows the customer to buy stable and frequently low-cost power without paying upfront development costs and to enable the system owner to utilize tax credits and income from the sale of the system’s energy generation.
Twenty-seven states currently allow the practice, and Kansas is one of only seven states to ban it outright.
Indeed, according to testimony from the Clean Energy Business Council, surrounding states Missouri, Oklahoma, and Colorado specifically allow PPAs, and Nebraska does not ban the practice but has not specifically authorized it. All four states — particularly Oklahoma — enjoy significantly lower electric rates than Kansas, which has some of the highest in the region.
In fact, in written testimony, the Kansas Chamber of Commerce noted that in the last ten years, Kansas has seen its competitive position slip from 14th lowest average energy costs to 34th — all while having a boom in wind generation across the state.
The Citizens’ Utility Ratepayer Board — which advocates for residential and small commercial ratepayers — stood neutral on the bill overall but did note. “We do not perceive that HB 2227 would pose a deleterious effect upon CURB’s constituents at large at this time.
KCC, utilities predictably oppose bill
KCC claims, in written testimony, that the bill “may significantly increase electric rates of Kansas utilities. Allowing non-utility renewable energy suppliers to sell electricity via a purchase power agreement to retail customers will result in the loss of volumetric sales to incumbent utilities.(emphasis added)“
The bill would allow any retail customer — including large industrial customers — to contract with a third party to build “renewable” generation on their property.
The KCC staff argued that “volumetric sales” cover a majority of a utility’s “fixed costs,” and a loss of volumetric sales to large customers would drive up rates for other customers who have not entered into a PPA, and “the host-customer generator will avoid paying for perhaps a significant portion of their respective fixed costs while enjoying the benefit of utilizing the incumbent utility’s electrical system to provide energy when needed to offset the renewable generators shortfall or outage. In addition, a utility has an obligation to serve all of its customers so it must have sufficient generation resources to be prepared to provide the full energy needs of a host customer-generator at all times.”
KCC’s solution to this is to amend state law to allow utilities to charge “customers” who may not be actually using the grid.
“To resolve this issue, utilities will need to collect lost fixed costs from customer-generators by one of the few means available to them,” KCC staff wrote. “That is, by implementing a demand charge, customer charge, or minimum bill designed to collect all fixed costs for all customers.”
This, according to KCC, would mean a “minimum bill” that might actually be higher than what a residential customer without a PPA might pay.
“For comparison purposes, a residential solar customer would pay between $70 to $100 in demand charges per month, while a non-solar residential customer would pay approximately the same or slightly less,” the testimony reads. “Staff would also note that high fixed charges and minimum bills are not popular with customers because they heavily diminish a customer’s control over his or her total bill, which is why the majority of a utility’s fixed costs are recovered via a volumetric rate.”
KCC staff admit that state law does not currently allow this and would require the Legislature to amend several statutes in order to implement the charges.