An independent review of Kansas rising electricity prices shows the current system for setting rates could use some improvements.
In a lengthy report requested by state legislators and submitted by London Economics, analysts concluded three main things: The current ratemaking process has been slightly balanced in favor of utilities, regulators are limited in their ability to protect consumers from paying for underused investments (such as aging coal plants), and additional bill surcharges and have been a key driver of rising rates.
The report looked at rates from all Kansas electric utilities from co-ops to municipals to Evergy, the largest utility in the state with about 1.5 million customers.
There are some near-term recommendations, Evergy Chief Customer Officer Chuck Caisley said. But the report doesnt say, Do this and rates will go down on any page, any graph, any appendix in the entire thing.
Lawmakers requested the study in a bill passed during the 2019 legislative session, saying at the time that they were concerned electricity prices were no longer competitive with neighboring states.
They wanted an independent organization to look into the effectiveness of current ratemaking practices and whether there were any options available to state regulators or the legislature to help rates become regionally competitive again.
THE REPORT, which came out earlier this month, offered three main suggestions.
Suggestion 1: The Kansas Legislature should create a state energy plan and require utilities to regularly submit an integrated resource plan, or IRP.
The states plan would allow the legislative and executive branches to set short and long-term goals about pricing, future transmission needs and renewable energy, giving regulators a clear framework for decision-making. And the IRP would encourage utilities to use the most cost-effective methods for meeting the states goals.
Suggestion 2: Lawmakers should consider performance-based regulation, with the state setting targets to incentivize electric companies to be more efficient. They would then be rewarded for that, rather than solely for building more power plants or transmission lines.
Suggestion 3: The legislature should make laws so that utilities can refinance their loans on older, uneconomic investments. This is a process known as securitization and could potentially ease the financial burden when utilities have to shut down coal-fired power plants and other, less profitable long-term investments.
The responses
Evergy generally supports the recommendations, Caisley said, but working out the details of any proposed legislative changes would be important. He added that Evergy is already working on an IRP as a condition of the merger between Westar Energy and Kansas City Power & Light.
