Brief⁽¹⁾

H.B. 2679 would require, on or after July 1, 2000, disclosure of certain information on retail electric bills. The Kansas Corporation Commission would be required to adopt rules and regulations before January 1, 1999, requiring jurisdictional investor-owned utilities to disclose the following information and unbundle or disaggregate their billing components, to include:

• generation service charges;



• distribution service charges;



• transmission service charges; and



• sales, use, and franchise taxes, and fees related to the sale or furnishing of electricity at retail.

The Commission also would require inclusion of other components on the bill, as determined, to adequately inform consumers.

The same components must be disclosed, on or after July 1, 2000, on the retail electric bills of consumers served by municipal electric utilities with annual gross revenues of $500,000 or more and by Kansas electric cooperatives. The affected cooperatives and municipalities would be authorized to determine any additional billing components. Moreover, those municipal utilities required to disclose specified components also must disclose the amounts of budgeted transfers to the general funds of their respective cities.

The bill would require all reasonable costs associated with unbundling rates to be recoverable through a competitive transition charge determined by the Commission. (Such charge could be imposed if retail competition is implemented to recover stranded costs.) In addition, the Commission would have the option to authorize such recovery through a utility's regulated rates regardless of the disposition of retail competition.

The bill would take effect upon publication in the Kansas Register.

Background

The unbundling of service components on retail electric bills was recommended by the Retail Wheeling Task Force as part of the comprehensive bill and final report submitted to the 1998 Legislature. Dave Dittemore of the Kansas Corporation Commission, representing the Commission staff, spoke in support of the introduced version of H.B. 2679. Mr. Dittemore cited two major benefits associated with the bill. First, the bill provides a vehicle for educating consumers about the relative costs of their electric services prior to the actual onset of retail competition. Second, unbundling of cost elements on customers' bills ensures the establishment of proper distribution rates, which will continue to be regulated. Proper price determinations would:

• prevent the subsidy of competitive generation operations by monopoly distribution customers; and



• provide utility shareholders an adequate opportunity to earn a fair and reasonable return on their investment.

In addition to Mr. Dittemore, proponents of the bill included: Jon Miles, Director of Governmental Relations for Kansas Electric Cooperatives, Inc.; Chris Giles, Director of Regulatory Affairs, Kansas City Power & Light; Barbara Hueter, Director, Government Affairs, Enron; Mike Taylor, City of Wichita; J. C. Long, Utilicorp United, Inc.; William B. Moore, Chairman of the Board and President, Kansas Gas and Electric Company; and Louis Stroup, Jr., Executive Director of Kansas Municipal Utilities, Inc. Most of these conferees proposed amendments to the bill.

The House Committee amended the bill to:

• postpone the implementation date for unbundling to July, 2000 (the introduced version of the bill provided for an implementation date of January 1, 2000; however, that date was considered by the Commission staff and certain industry representatives to afford affected parties inadequate preparation time for unbundling);



• require municipal electric utilities to participate in the unbundling effort if they have annual gross revenues of $500,000 or more (this would exclude from the unbundling requirement 41 of 121 Kansas municipal electric utilities having less than $500,000 in annual gross revenues, or a total of 11,235 customers);



• specify the direct or transactional taxes to be included on the bill as sales, use, and franchise taxes and eliminate the requirement that indirect taxes be separately itemized;



• clarify that municipal electric utilities would not be under the jurisdiction of the Kansas Corporation Commission for purposes of unbundling requirements (existing law authorizes the Commission to exercise jurisdiction over a municipal utility's service area if it is outside the three-mile limit of the city);



• ensure that utilities could recover all reasonable costs of complying with the unbundling requirements; and



• provide that the bill would take effect upon publication in the Kansas Register.

With respect to the impact of the introduced version of the bill on state expenditures, the Division of the Budget's fiscal note projects fee fund expenditures totaling $98,170 in FY 1999 for the salaries and operating expenditures of 1.7 positions at the Kansas Corporation Commission. Costs for FY 2000 would be $62,946 for the salaries and operating expenditures of 1.2 positions. The Commission would have to develop and approve administrative regulations and approve utilities' unbundled rates. If consultants assume the unbundling responsibilities, the Commission reports the costs could be higher. With respect to the impact of the bill on local expenditures, the Division's fiscal note indicates estimated expenditures, according to the League of Kansas Municipalities, to be $5,000 per municipal electric utility or a total of $605,000 for 121 utilities. In addition, there would be overhead and computer conversion costs associated with unbundling.

1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.