J.C. Moore Online
Current Events from a Science Perspective

Who Is Responsible for High Electric Rates in Kansas?

“Evergy is responsible for the high electric rates in Kansas, but the Kansas Legislature is to blame for nothing being done about it. “

In 2008, Kansas disbanded the Kansas Energy Council, which sought to take a strategic approach to the development of the state’s energy system. This left the three-member Kansas Corporation Commission (KCC) responsible for regulating electric rates in the state, along with regulating all the other state corporations. Besides being overloaded, the KCC is reactive rather than proactive. That is, Evergy brings their rate requests to the KCC and they decide how much of the rate request is justified. Neither the KCC nor any other state agency is responsible for proactively planning how to develop the electricity needs of the state in such a way as to balance Evergy’s needs with those of the consumers.

Until recently, the KCC had a majority of members who looked unfavorably on renewable energy. Mark Ruelle, past CEO of Evergy, attended an ALEC meeting where a strategy was devised to discourage net energy metering (NEM) customers from installing their own wind turbines or solar panels. The idea was to convince other customers that they were subsidizing NEM customers. That is not true. An independent study in California found that NEM customers provide a benefit both for other ratepayers and for the electric company. NEM customers allow utilities to avoid costs of generation and fuel, maintenance and upgrade of transmission and distribution infrastructure, transmission losses (which account for 7% of losses), capacity purchases, and compliance with renewable energy standards. NEM also reduces peak loads, transmission losses, and the need for new power plants. Similar research studies in Vermont, New York, California, Texas, Missouri, and Nevada also concluded that net metering provided a net positive benefit for utility companies and their customers. Still, the KCC allowed Evergy to impose an extra charge on those customers, even though they are helping to reduce electric rates. That policy was finally struck down by a court ruling which found it discriminatory to charge different rates for NEM customers.

The KCC has been generous with Evergy. Residential customers now pay a customer fee, an electricity fee, a fuel charge, a distribution fee, an environmental fee, an energy efficiency charge, and even Westar’s property taxes. Evergy has submitted 22 rate cases since 2008, and the KCC has allowed rate increases in most of those. In 2008, electricity in Kansas was 7.49 cents per kilowatt-hour but it has since grown to 12.7 cents per kilowatt-hour. That is less than inflation, but still much more than it needs to be. A decision was made by Evergy a decade ago to invest in coal-fired energy production, ignoring environmental concerns. Since then environmental regulations have escalated the costs of operating coal plants. Over 50% of Evergy’s energy is now produced from non-carbon sources, which are much less expensive than coal-fired power plants. Yet Evergy is still running their coal-fired power plants because they can charge more for fuel costs.

In 2019, the Kansas Legislature commissioned London Economics to study why Kansas had higher electric rates than the surrounding states*. Their main findings were that areas that need improvement are:

  • Residential rates of IOUs (investor-owned utilities) are high compared to similarly regulated utilities in regional states;
  • Ratepayers continue to pay for utility investments that are underutilized;
  • IOU cost recovery through surcharges and riders without a comprehensive ratemaking process is contributing to rising costs to ratepayers; and
  • Kansas lacks a mandated IRP ( integrated resource plan), as found in other states.

To correct this the London study offered four near-term recommendations:

  • Adopt a state energy plan;
  • Create a competitive procurement framework and require regulated utilities to submit integrated resource plans at regular intervals;
  • Allow KCC to explore the development of performance-based regulation mechanisms to incentivize efficiency and alignment with customer benefits and state policy objectives; and
  • Establish a framework for the retirement and securitization of assets where cost-benefit analysis demonstrates clear benefits to customers.

In response to the London study, the Governor submitted an Executive Reorganization Order (ERO) to develop a State Energy Plan and create an Independent State Energy Office. This would have given Kansas the ability to proactively plan for our long-term energy needs and to look for ways to decrease our electric rates. EROs routinely go into effect 60 days after submission, unless they are rejected by the legislature. However, when the Governor’s ERO was submitted to the legislature, they voted it down. The Republican majority did not want a Democratic Governor to get credit for creating the office or to be able to appoint members to it.

So there you have it. The legislature spent almost $1 million on the London study, but refused to implement its recommendation because of partisan politics. When your electric bill gets really high next summer, remember who is responsible.

*The Kansas Legislative Research Department has a guide to how electric rates are set and lists the history of legislative action on electric rates. It also contains a summary of the London study.

Tags: , , , , , , ,

One Response to “Who Is Responsible for High Electric Rates in Kansas?” »

  1. David Moore Says:

    Great article.
    ALEC needs investigated.

Leave a Comment

This blog is kept spam free by WP-SpamFree.