KANSAS CITY, Mo. — Four of the five members on Evergy’s finance committee, tasked with recommending management and investment decisions to the board of directors, were selected by activist hedge funds that critics worry are asserting undue influence over the electric utility.
That involvement, consumer advocates say, could drive up rates for Evergy’s 1.6 million customers in Kansas and Missouri to satisfy the hedge funds’ desire for a return on their investment.
“These are not nice guys — they’re thugs,” said Tyson Slocum, energy program director for the nonprofit Public Citizen. “And they have a business model that is structured to intentionally evade regulatory oversight, and we think that’s a problem.”
Slocum, for months, has been investigating the relationship between Evergy and Elliott Management Corp. and Bluescape Energy Partners.
Utilities like Evergy are highly regulated and cannot simply raise customers’ electric bills to bring in more revenue. But when they invest in new energy generation and transmission projects, they’re entitled to a return, benefitting investors like Elliott and Bluescape.
Elliott, one of the hedge funds, with a near 5% ownership stake in Evergy, previously pressured the utility to take on that sort of investment, resulting in the utility’s Sustainability Transformation Plan, an $8.9 billion capital plan.
And while the two firms own a small enough sum of stock in Evergy to remain below the threshold regulators use to determine whether businesses are affiliated, consumer advocates worry Evergy is too close to them both.
The Kansas Corporation Commission, which regulates utilities, said in a statement Tuesday it has concerns about Elliott’s role in encouraging and developing Evergy’s sustainability plan. The KCC ordered Evergy to explain increased spending in its five-year projections and the impact it will have on rates.
The merits of the plan will be evaluated in future rate cases, the KCC said, with an emphasis on achieving regionally competitive rates.
Public Citizen and the Communications Workers of America filed a protest with the Federal Energy Regulatory Commission, urging members to require Evergy to disclose more information about its relationship with the two hedge funds and their relationships with each other.
“There is substantial evidence that the hedge funds exert controlling influence over Evergy,” Public Citizen and CWA wrote to FERC.
Evergy’s spokeswoman, Gina Penzig, said in an email Elliott and Bluescape are “shareholders with no more or less control than any other shareholder.”
“We have engaged in a dialogue with them over a process and have been transparent about that process,” Penzig said. “We frequently have dialogue with shareholders about our business operations and strategy.”
Bluescape and Elliott did not return requests for comment for this article.
Scrutiny of Evergy and Elliott’s relationship has been ongoing since last year when the hedge fund sent a letter to Evergy’s board urging the company to either consider a sale or invest in capital. Elliott then gained two seats on Evergy’s board of directors.
