Kansas House bill allows KCC to tweak electric utility profits based on customer rate changes

Yahoo

05-02-2025

Chuck Caisley, a lobbyist with Evergy, said the company opposed House Bill 2032, which would authorize the Kansas Corporation Commission to raise or lower Evergy's return on equity based on fluctuation of consumer electric rates. (Kansas Reflector screen capture from Legislature's YouTube channel)
TOPEKA — Agribusiness lobbyist Randy Stookey praised a Kansas House bill allowing state regulators to lower by as much as 0.5% the return on equity for shareholders of an electric public utility when retail rates increased more than 1% in a calendar year.
The legislation would also grant the Kansas Corporation Commission authority to increase by 0.5% a utility's return on equity for investors when the total cost of electricity paid by retail customers, including fees, taxes and charges, didn't climb above a 1% threshold during the year.
Stookey's interest in the bill reflected his representation of grain elevator companies, biofuel processing plants and businesses supplying inputs to Kansas farmers — all of which were heavy consumers of energy.
'Kansas electric energy rates are some of the highest in our region,' he said. 'We must continue to seek ways to decrease our high energy costs for all Kansans. We stand in support of this reasonable legislation.'
The House Energy, Utilities and Telecommunications Committee didn't take action Tuesday on House Bill 2032. The measure drew firm opposition from Evergy, which has 1.7 million electricity customers in Kansas and Missouri. The legislation was supported by the Kansas Industrial Consumers Group and the Kansas Chamber. Neutral testimony was offered by KCC staff and consumer advocates at Citizens' Utility Ratepayer Board.
Chuck Caisley, an executive with Evergy, said the company firmly opposed the policy intent of the House bill. He said the KCC possessed the power to alter investors' return on investment when considering regular utility rate adjustment cases.
'This bill is a solution in search of a problem,' Caisley said. 'It is a significant departure from how rates are currently set in Kansas and in most states in the U.S. No other state in the U.S. has a mechanism that works like this. The 1% level of all-in average retail rates increase or decrease is completely arbitrary and is not indexed against any other economic factors or forces.'
He said the bill created a 'severe disincentive' for Evergy to invest in the electrical grid at a time when the company sought to replace infrastructure and deploy technology to improve reliability of service. Enactment of the bill would place in jeopardy plans to build two natural gas power plants in Reno and Sumner counties by 2030, he said.
In response to questions from Rep. John Carmichael, D-Wichita, Caisley said Evergy had a proposal pending before the KCC to elevate electric rates by 10% to cover infrastructure investments. The new natural gas plants could trigger escalation of utility rates by 3% to 5%, he said.
Paul Snider, who lobbies on behalf of large-volume energy users with the Kansas Industrial Consumers Group, said the organization would like to see HB 2032 approved by the Legislature and Gov. Laura Kelly. He said the consumer group had been sounding an alarm about high electric rates in Kansas since 2018.
'We have highlighted Evergy's highest-in-the-region rates compared to their investor-owned peers,' Snider said. 'We believe that excessive capital spending is the root cause of our high rates and the chief impediment to achieving regionally competitive electric rates.'
He said the assumed financial return granted shareholders for investments in Evergy was 9.4% to 9.5%. He said Evergy had been increasing capital spending at an 'unsustainable rate.' And, he said, whenever Evergy invested in new poles, wires, substations and power plants the cost of those projects was passed to consumers and the elevation of return on equity meant more money in the pocket of shareholders.
Snider said the House bill would incentivize Evergy to limit rate adjustments to 1% annually in exchange for the KCC's expansion of the company's return on investment by 0.5%.
'Let me be clear,' Snider said. 'We are not asking Evergy to stop spending money. Reliability and competitive rates can coexist.'
Justin Grady, deputy director in the utility division at the KCC, said examination of Evergy's electric rates for residential customers showed that from 2001 to 2023 the 'all-in' rate charged consumers increased or decreased by more than 1% in 15 of those 22 years.
'Utility rate changes do tend to be larger than 1% per year on average,' Grady said. 'A 1% annual rate increase threshold may be an unrealistically low expectation, especially in the current environment of increasing capital expenditures to replace aging infrastructure and to support reliability and economic development in the state.'
Grady said the prospect of a 0.5% change up or down in return on equity could create uncertainty in financial markets and influence investor support for the utility infrastructure in Kansas.
He said lawmakers should realize the purchase of fuel and produced power were the largest components of electricity rates and were mostly outside control of a utility company. He also said the bill properly offered the KCC flexibility to make rate-of-return decisions on a case-by-case basis.