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Minutes for SCR1612 - Committee on Commerce
Short Title
Urging the state corporation commission to lower retail electric rates to regionally competitive levels.
Minutes Content for Mon, Mar 12, 2018
Vice-chairperson Suellentrop opened the meeting on SCR 1612 and requested Revisor Chuck Reimer provide an overview of the resolution.
Vice-chairperson Suellentrop recognized Jim Zakoura, Kansas Industrial Consumers Group (KICG), who provided testimony in support of the resolution. The KCIG is a coalition of large-volume energy users in Kansas and account for about 42 percent of Westar's industrial sales. The members collectively represent billions of dollars of investment in the State and employ thousands of Kansans. KICG believes high energy costs are negatively impacting residential customers, schools, hospitals, and large and small businesses. Electric rates have been increasing rapidly the last decade. KCP&L residential rates have increased 70 percent since 2007. Westar's residential rates have increased 67 percent since 2007. Starting in 2017, Kansas' electric rates have become the highest in the region. A number of charts were providing illustrating Westar rates, rate increases versus inflation, social security income, and commodity prices, and regional prices for electricity. (Attachment 1) (Attachment 2)
Senator Olson questioned how reductions in industrial rates for electricity might have impacted residential rates. Mr. Zakoura responded he was not aware of any instances where commercial and industrial customers have had price discounts which impacted residential customers in an adverse way.
Senator Holland asked Mr. Zakoura if other electric companies have had similar increases in their rates. Mr. Zakoura said he did not have information readily available on other companies' rates. Senator Holland asked Mr. Zakoura for his thoughts on why the KCP&L and Westar electric rates are higher than their competitor rates across the region. Mr. Zakoura said until about 10 years ago, the KCP&L and Westar rates had been lower than their competitors. Mr. Zakoura responded there are a number of issues driving the increases. Two possible reasons include substantial expenditures on environmental controls as well as the amount of investment in building new transmission.
Vice-chairperson Suellentrop recognized Dorothy Barnett, Clean Energy Business Council, who provided testimony in support of the resolution. The Clean Energy Business Council (CEBC) represents twenty-five businesses and organizations who are focused on advancing the clean energy economy and growing their businesses in Kansas. One way Kansans could have mitigated some of the high cost of electricity was to have access to utility scale energy efficiency programs, like all of the other states in our region. The testimony included the average price of electricity for residential, commercial and industrial customers for the states of Kansas, Missouri, Nebraska, Oklahoma and Colorado as of November 2017. The CEBC encouraged the Committee to insist the Kansas Corporation Commission not only begin a comprehensive study, but wait to approve rate increases until the results are presented to the Kansas Legislature. (Attachment 3)
Vice-chairperson Suellentrop recognized Jeff Glendening, Americans for Prosperity, who provided testimony in support of the resolution. Kansas has an energy poverty problem. Households with incomes below 50 percent of the poverty line spend a staggering 29 percent of their annual income to pay for their home energy bills. In total, the Home Energy Affordability Gap quantifies over 151,000 households experiencing high energy burdens. Kansas has a competitive disadvantage when benchmarked to its regional peers. In this regard, residential rates are not only the highest of the region, but higher than the national average (see graphs included in testimony). The Legislature should grant the Kansas Corporation Commission (KCC) all the necessary statutory authority to enhance its oversight capacity and to allow it to thoroughly exercise its mission in protecting the consumers of the state. (Attachment 4)
In reviewing the graphs in the testimony, Senator Bollier asked what happened in 2009. Mr. Glendening responded he would need to research the question.
Senator Holland asked Mr. Glendening his thoughts on whether the KCC had not been aggressive enough, or were the rate increases due to an internal management issue at KCP&L and Westar. Mr. Glendening said it could be a combination of both. The problem has been recognized. The next step is to determine why.
Senator Olson noted there have been consequences due to federal mandates on energy production.
Vice-chairperson Suellentrop recognized Chuck Caisley, Kansas City Power and Light and Westar Energy, who provided testimony in opposition to the resolution. Westar Energy and Kansas Power and Light together provide electricity to most Kansas homes and businesses, either directly, or indirectly, or through commitments to smaller municipal electric utilities and rural electric cooperatives. The rates being charged are appropriately limited to costs which are closely reviewed by regulatory auditors to assure the rates are both prudent and needed to serve their customers. The forces that have driven electricity costs higher over the past decade are formidable: federal environmental mandates; state energy mandates and policy objectives; increasing concerns about the security of the grid; and customers' expectations for reliable electric service able to meet the stringent demands of today's computer-controlled manufacturing equipment. For most of our history, increasing demand for electricity and exporting power to other states has helped mitigate cost increases. Over the last decade, an anemic economy coupled with a recession have nearly eliminated those tools to keep costs down.
The testimony included a statement concerning reductions in federal income tax expense; cost saving initiatives; the merger of KCP&L and Westar Energy; and comments concerning rate comparisons.
Mr. Caisley indicated almost all states that border Kansas are served by large, multi-state investor-owned electric utilities. Over the last decade, these companies have grown and combined through mergers, like the one proposed between Westar Energy and KCP&L. As a result, electric rates in neighboring states have benefited from having larger, more efficient utilities that are able to drive operating costs down through size and scale. We now have that opportunity in Kansas. SCR 1612 is not needed to encourage action or empower the KCC, and its staff, who have done an admirable job using the regulatory framework in Kansas to balance the need for investment in the electrical system while representing customers across Kansas. (Attachment 5)
Written only testimony in support of the of the bill was submitted by:
- Michael Matheson, Chairman, Americans for Electricity Choice (Attachment 6)
- Jim Zakoura, President, Kansas Industrial Consumers Group (Attachment 7)
Written only testimony in opposition of the bill was submitted by:
- Leslie Kaufman, Director of Government Relations and Legal Counsel, Kansas Electric Cooperatives, Inc. (Attachment 8)
Written only testimony neutral to the bill was submitted by:
- Phil Wages, Director of Member Services, Government Affairs, and Business Development for Kansas Electric Power Cooperative, Inc. (Attachment 9)
Ernie Kutzley, Advocacy Director, AARP (Attachment 10)
Vice-chairperson Suellentrop said the hearing on SCR 1612 would continue at the next Senate Commerce Committee meeting.
The meeting was adjourned at 9:29 a.m. The next meeting is scheduled for March 13, 2018.
