Kansas Gov. signs pro-economic development bill supported by Evergy into law

A Kansas bill supported by Evergy Inc., the state’s largest electric utility, has been signed into law and stands to make it easier for companies to build more energy generation to meet rising power demands.

Kansas Democratic Gov. Laura Kelly on April 18 signed into law House Bill (HB) 2527, which essentially rewrites laws on how the state sets electric rates in an effort to attract investors and developers for a new, fracked, natural gas-burning power plant. Both chambers of the Kansas Legislature recently approved the bill.

Chuck Caisley, Evergy’s chief customer officer, noted the bill’s importance during Feb. 6 testimony before the Kansas House Energy, Utilities and Telecommunications Committee, pointing out that the state needs additional generation capacity and grid investment to build the electrical system infrastructure that’s necessary to serve “a generational opportunity in potential economic development.” 

More investment in Kansas, Caisley said, also will create thousands of jobs and maintain electrical grid reliability, particularly in extreme weather conditions.

Darrin Ives, Evergy’s vice president of regulatory affairs, echoed those sentiments during a March 18 hearing held by the Kansas Senate Utilities Committee.

Specifically, HB 2527 incentivizes capital investment in Kansas utilities by adjusting discount rates and other financing tools to better align with regional practices, while providing safeguards to protect Kansas ratepayers, Ives said.

In turn, that investment in the state’s utility infrastructure will create jobs and allow for additional economic development opportunities, he added.

The bill also establishes standards for the retirement of certain electric generating facilities and increases the cap on the amount of power customers with renewable energy systems can sell back to their utility, providing citizens and businesses with more opportunities for energy independence, said Ives.

Overall, according to Ives’ testimony, HB 2527 will unlock opportunity and value for the state.

For instance, the new law will increase investment in the electrical grid in high-growth areas by having the Kansas Corporation Commission (KCC), local and state economic development entities, developers, and municipalities work together to identify areas of high growth, and build additional capacity ahead of demand.

HB 2527 also will reduce the time it takes to extend electrical service to companies that are considering locating in Kansas, said Ives.

The bill will ensure there’s enough power generation to supply economic development and growth in the state via construction of a hydrogen-compatible, combined-cycle natural gas plant in Kansas, and will enable continued investment in wind and solar across the state, he said.

Additionally, HB 2527 will lower the overall cost of building large power plants by reducing the total amount of interest on large multi-year power plant construction projects, Ives said, and will improve competitive economic development pricing on electricity with neighboring states by ensuring economic development rates have parity with Missouri for large electrical customers.

Ives also said the bill includes significant consumer protections, including restricting the use of Plant In Service Accounting (PISA) to existing generation, distribution, IT/cybersecurity and other non-transmission and non-new generation capital investments.

Justin Grady, deputy director of the KCC’s Utilities Division — who testified on March 18 as a neutral conferee on the bill because previous concerns staff had with the bill were resolved through a stakeholders’ session when the bill was in the state House — discussed the importance of the bill’s customer protections. 

For instance, Grady said the Utilities Division liked the fact that the revised HB 2527 allows parameters for Economic Development Discount Rates (EDRs) — which will now be able to be offered for 10 years instead of just five years — and removes the requirement that the discount be tracked and recovered from all other customers in a rate case.

The bill also allows an electric utility to recover the carrying costs associated with the construction of a new natural gas-fired electric generating facility through a surcharge on customers’ bills, rather than the costs being collected through general rate cases, he said.  

“After all of these revisions, staff believes that HB 2527 is a well-crafted piece of legislation that is a policy call properly before the Legislature,” he testified. “This bill does not contain any explicit flaws that are inherently inequitable to Kansas ratepayers, instead it presents a series of trade-offs for policymakers to consider.”

For example, PISA would likely increase electric rates and diminish a utility’s incentive to manage costs in between rate cases, said Grady. 

“On the other hand,” he added, “PISA will also lessen a utility’s financial disincentive to proactively invest in infrastructure to support future economic development or other policy goals of the state, such as reliable electric service.”

Key stakeholders involved in the discussions to revise HB 2527 included Evergy, KCC staff, the Citizens Utility Ratepayer Board, Kansas Industrial Consumers, Kansas for Lower Electric Rates, the Kansas Chamber of Commerce, the Sierra Club, and AARP, among others.

According to Grady, the stakeholder process resulted in a revised version of HB 2527 that substantially resolved all of the concerns that KCC staff previously expressed about the original bill. 

“Most importantly,” Grady testified, “the bill has been revised to remove entirely the provisions that would have limited the commission’s authority to set the return on equity and capital structure in rate cases that best balance the interests between shareholders and ratepayers, and which results in just and reasonable rates.”

Evergy and the KCC weren’t the only supporters of HB 2527.

Other proponents of the bill included the Salina Community Economic Development Organization, Liberty Utility, Empire District Electric Co., the Mid-America Carpenters Regional Council, the Kansas Chamber of Commerce, the Kansas Economic Development Alliance, KC Area Development, LiUNA Local Union 1290 Construction and General Laborers, and the International Brotherhood of Electrical Workers (IBEW) Local Unions 124 and 271, among others.

“This is a jobs bill,” Russell Kennedy, business manager at IBEW 271, and Bo Moreno, business manager for IBEW 124, wrote in March 18 written testimony supporting HB 2527. “Not only will it provide jobs through the construction of a power plant, but the projects that land in Kansas will only further perpetuate growth in our economy and strengthen the middle-class in Kansas.”