Proposal to regulate Evergy’s charges could reduce customer bills

“No one got exactly what they wanted, but I do think this is a good thing for the state,” said Justin Grady, testifying on House Bill 2225 on behalf of the Kansas Corporation Commission’s utilities division.

The proposed legislation would create more government regulation of Evergy’s transmission delivery charges. Debate is ongoing about the company’s method of having consumers shoulder the expense of local transmission projects through ballooning delivery fees while profiting from high investment returns.

“What the bill will do is provide much more enhanced oversight and public accountability in a review process for these investments,” Grady said.

Kansas law allows electric utilities to increase transmission delivery charges without KCC approval. Evergy only has to file a report with the KCC while hiking up that fee. Critics say Evergy is taking advantage by recouping infrastructure costs through these charges.

Evergy currently receives high federal returns on its capital expenses because of a 2007 statute meant to incentivize better electric infrastructure in the state. Under the statute, Evergy receives a 10.3% return on transmission investments in central Kansas, and an 11.1% return for investments in the Kansas City metro area.

“We are trying to close a loophole that allows Evergy to determine what, when, and how much local transmission it wants to build, and then automatically pass these costs on to Kansas consumers,” Grady testified.

Evergy’s 2022 capital plan, which outlines investments in the grid and energy production, was more than $1 billion higher than the one it filed in 2021, which was $1 billion higher than its filing in 2020. The company blamed the increases on inflation, and its plans to add more renewable energy investments.

Under the bill, for-profit, investor-owned electric utilities couldn’t recoup construction-associated costs through a transmission delivery charge when the construction is planned entirely by the utility without notice or directive from a federally regulated entity. The bill only applies to electric utility companies that are under the jurisdiction of the Kansas Corporation Commission and serve more than 20,000 customers in the state, meaning the bill directly applies to Evergy.

Grady estimated the legislation would result in an estimated $9 million reduction in the central Kansas delivery charge, lowering average residential customer bills by about 47 cents per month. The metro area reduction would be an estimated $1.6 million overall, lowering average residential customer bills by about 30 cents per month.

“I’m not saying they’re spending money on things that were excessive or unnecessary, but with this advanced oversight in view, it just entails or ensures that’s not going to be the case going forward,” Grady said in an interview. “And if it is the case, someone will notice and fine them.”

The House Energy, Utilities and Telecommunications Committee advanced the bill out of committee on Thursday. The only opponent during testimony was Evergy spokesman Chuck Caisley, who called the bill restrictive.

“We believe it goes too far and is regressive regulatory policy in its current form,” Caisley said.

Jeff McClanahan, director of the KCC utilities division, testified on energy rates during a Senate Utilities Committee meeting Thursday. McClanahan pushed back on the idea that Evergy was building transmission projects solely for profit.

“We see aging infrastructure being replaced,” McClanahan said. “We don’t see anything that gives us heartburn that it’s just being done to increase profits.”

Senators said there needed to be a balance between investing in infrastructure and treating consumers fairly.

“I love the idea of reliability. We want good, reliable infrastructure,” said Sen. Jeff Pittman, a Leavenworth Democrat. “However, we can’t just use it as a boogeyman to say we never want to have lower cost-type stuff.”