March 24, 2023

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Senate bill would eliminate competition in power transmission construction

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A bill in front of the Kansas Senate would effectively give complete control over electric transmission projects in the state to utilities, according to the Kansas Chapter of the Americans for Prosperity Foundation.

Senate Bill 68, which will be in front of the Senate Utilities Committee for three days of hearings starting Monday, Feb. 6, 2023, would give utilities such as Evergy — the largest private electric utility in the state — “right of first refusal” over the construction of any new electric transmission project within their territory.

The bill states, in part: “An incumbent electric transmission owner shall have the first right to construct, upgrade, own and maintain an electric transmission line that has been approved for construction in a transmission plan if such electric transmission line interconnects to facilities owned or proposed to be constructed by the incumbent electric transmission owner.”

The problem, according to AFP-K Director Elizabeth Patton, is that “right of first refusal” means that rather than putting transmission projects out for competitive bid, companies like Evergy would simply build them themselves — likely at higher cost.

“What this does is enable (utilities) to eliminate the competitive bidding process for construction,” Patton said in a phone interview Thursday. “There are several companies in Kansas who (build transmission lines) and this would block them out and … at the end of the day, likely it would put some of these companies out of business or would eliminate jobs in Kansas.”

Moreover, the additional costs would result in higher electric rates for Kansans, as the additional costs are passed on to retail ratepayers — all while Kansans are already paying some of the highest rates in the nation. 

“If Evergy were allowed to eliminate competitive bidding for these projects, there’s really no end in sight at what cost that would be to ratepayers,” Patton said. “We’ve seen in other states that when you have that sort of competitive bidding eliminated, it inherently raises rates.”

Patton said that competitive bidding on these projects generally lowers costs by 20 to 30 percent.

Patton noted that cost of transmission projects is only one factor in rising rates, and that the issue is complicated.

Controlling costs — in part through competitive bidding — is one factor, as is making sure transmission projects are actually needed.

As reported by the Sentinel previously, the Kansas Corporation Commission, which oversees private utilities like Evergy, in the state, has been pushing transmission projects — without a clear justification of the benefits to Kansans, and while admitting it would increase costs.

The KCC, which last year cleared the way for a major transmission project to take power from the Wolf Creek nuclear power station to Missouri, has filed comments with FERC suggesting that more transmission capacity should simply be “required.”

At a joint state-federal task force with FERC, several state officials — including commissioner and former chairman of the KCC Andrew French, appointed by Gov. Laura Kelly– suggested that FERC require regional grid operators have the capacity to transfer a minimum amount of energy to other grid regions

The KCC position, stated on at least three occasions in the 12 months, is that Kansas retail ratepayers should pay part of the costs to expand or upgrade the transmission grid for exporting Kansas renewable energy — despite the fact those upgrades materially increase costs for Kansans

The necessity of the Wolf Creek project for Kansas was never completely established, and Patton said the need for new transmission projects is another issue.

“Unnecessary transmission development and transmission delivery charges are one of the fastest growing reasons why our costs are rising in the first place,” she said. “Energy issues can be complex, but one thing is not: Right of First Refusal legislation strengthens monopolies, raises rates even higher and eliminates jobs in Kansas.

“Competition is a proven way to help lower costs to consumers, going in the opposite direction when costs are already so high is simply irresponsible.”

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