July 20, 2024

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Utility Companies Battle Electricity Rates Proposal

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Kansas electricity rates are the highest in the region, but legislation intended to determine the reasons and possible solutions faces fierce opposition from utility companies. SB 69 would commission an independent, third party to study the issue.

“It is a well-known fact that during the past decade, electricity rates have increased by 70 percent,” Jeff Glendening, the state director for Americans for Prosperity-Kansas, said. “Those increases raise red flags by themselves, but when benchmarked to the inflation rate for the same period, the urgency and necessity of the study proposed in this legislation becomes rather clear.”

Since 2007, KCP&L and Westar Energy bills increased by 70 percent and 67 percent, respectively. Inflation rose by 18 percent. The two companies merged in 2018 to form Evergy, which serves more than 1 million Kansas customers.

Chuck Caisley, a lobbyist for Evergy, told a Kansas Senate Committee that the Kansas Corporation Commission completed such a study in 2018, and Kansas Senate and House utility committees were given a presentation detailing the findings of the 125-page study. Caisley said while he supports a third party study,  SB 69 is “the proverbial wolf in sheep’s clothing.”

“We support looking at solutions up to and including deregulation in Kansas,” he told the Senate committee. “Any bill that is a fair study of rates designed to seek a solution; we have nothing to hide. That said, we do not support this bill…I have never seen such a one-sided bill as SB 69.”

Today, when an investor-owned utility like Evergy wants to increase electricity rates, it must seek the permission of the Kansas Corporation Commission, whose members are political appointees. The commission authorizes shareholders of the utility companies a 9.3 percent rate-of-return on investment, which Caisley said is lower than peer utilities. Additionally, shareholder-owned utilities can seek permission to increase electricity rates for things like capital improvements.

Caisley said the legislation is a “crafty attempt” to make changes to the way electric rates are set. The proposal mandates that utility companies show that potential rate increases wouldn’t harm the competitiveness of Kansas compared to other states.

Steve Chriss, Walmart’s director of energy services, testified in support of the legislation. The national retail chain purchases electric services from 22 different providers in Kansas. Chriss said Kansas’s utility rates are not competitive with surrounding states. Walmart pays 10 percent less per kilowatt hour in Missouri, 13 percent less in Colorado, 18 percent less in Arkansas, 19 percent less in Nebraska, 24 percent less in Iowa, 25 percent less in Texas, and 36 percent less in Oklahoma.

“Walmart recognizes that electric utilities have a duty to provide safe, adequate and reliable service and should have the opportunity to recover their reasonable and prudent costs and earn a reasonable return on their investments,” Criss said. “However, it is important that customer impacts are at the forefront of Corporation Commission decision-making and that customer interests are fully balanced with utility shareholder interests.”

The proposed bill also would require the KCCC to justify any rate increases that exceed the consumer price index (CPI) in any given year.

“Such an arbitrary standard does not take into consideration all of the cost factors that should be considered in the ratemaking process,” Caisley said in written testimony submitted to the Senate committee. When he appeared before the committee, he used taxes as an example for why utilizing CPI is not good public policy.

Graphic courtesy of kansasenergyproblem.com

“The very schools that have signed on as proponents of this bill and complained about rate increases are a significant reason rates have gone up over the last several years,” Caisley said. He noted that school mill levies have increased at dramatic rates, at a faster pace than CPI and than utility rates.

“KCP&L and Westar are the largest payers of property taxes in almost every single county we operate in, and property taxes from schools are an ever-increasing driver of increases in utility rates,” Caisley said.

Meanwhile, the Wichita Public Schools argued that high utility rates are straining school budgets.

“The school districts do not have customers to whom it can pass higher electricity costs,” Tom Powell, Wichita USD 259’s legal counsel said in written testimony. “The money to pay for electricity rate increases must come from reductions in other parts of school district budgets.”

KCC’s  study determined one reason for KCP&L and Westar rate spikes is due to the companies making investments in electric generation, like wind power, and in response to federal and state environmental mandates. Utility companies in other states face environmental mandates, however, yet still have much lower rates.  Critics say large energy companies have beaten a path to the KCC’s door requesting more and more increase, and SB 69 provides a way to work toward common sense solutions to high utility rates.

“I believe Kansas is at a crossroads,” Adam Pogue, the Vice President of Manufacturing Services at Spirit Aerosystems, told the committee in written testimony. “The legislature must decide if regulators have done a great job supporting efforts to build a more prosperous economy, or if it is time for a more comprehensive and strategic examination of ways we can work together to achieve more competitive electricity rates for everyone.”

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