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Minutes for SB339 - Committee on Utilities
Short Title
Allowing the state corporation commission to approve certain electric contract rates and associated cost recovery from all rate classes.
Minutes Content for Wed, Feb 12, 2020
Chairman Masterson opened the hearing on SB339.
PROPONENTS:
Staff gave an explanation of the bill. (Attachment 1)
Jeff Martin, Vice President, Customer and Community Operations, Evergy gave testimony in support of SB339. He stated that the passage of SB339 will create consistency in Evergy's service territory in how we apply EDRs. (Attachment 2)
This concept has been successful in Missouri. The concept was used to help bring 250 high-paying jobs to Sedalia, where they opened the first all wind-powered steel mill in the United States.
He went on to say that the mechanism proposed in SB339 allows Evergy or another energy provider to negotiate a rate that uses existing or incremental generating capacity for new or existing customers. He stated that KCC must approve the rate. Because Evergy's rates are already fixed, this special rate does not impact other customers.
Customers who bring new or increased demand to the system equal to or greater than 200 KW (ex. retail box store or a large hotel) will receive a 20% average discount over a five-year period.
In conclusion he stated that last week, this committee heard a summary of LEI's rate study, which concluded that EDRs are a tool that can help make Kansas' electric rates regionally competitive.
Mitch Robinson, Kansas Economic Development Alliance supports SB339. (Attachment 3) He stated that this bill would provide for an economic development rider for large scale economic development projects that use a projected load of 50 megawatts of power or greater at one site. This new tool would be available for all electric providers within the State of Kansas. This will help level or improve Kansas's competitiveness within economic development recruitment
He then identified several key points concerning this SB339
Annie Brock, DataBank, stated that they operate 20 Data Centers in 9 markets across the country with 3 of those facilities residing in Kansas. (Attachment 4) We have 275 employees in our company and 40 are based here in Kansas. She said their company bids on many competitive projects both regionally and nationally with power loads exceeding the 200 KW and 300 KW range. The discounts proposed in this bill would provide a more competitive price point, allowing us to attract more businesses into the region and make Kansas a more attractive destination for large enterprises.
Andrew French, Kansas Industrial Consumers Group stated that they believe high energy costs are negatively impacting residential consumers, schools, hospitals, and large and small businesses. (Attachment 5) Any economic development professional will tell you energy rates are a factor in the site selection for a company, whether it's to relocate to Kansas, expand current operations or simply to stay in business.
He stated that under this bill, the KCC is authorized to approve contract rates to retain and attract extremely large industrial customers. This bill would also allow standardized economic development rates to attract certain high-value customers.
Under this legislation, customers-including our members-would be required to reimburse Evergy, with interest, for the cost of offering the discounted rates. While KIC expects the benefits of adding substantial new load to the system should outweigh these costs, other stakeholders may understandably be concerned with the cost-recovery elements of this bill.
Jason Watkins, Wichita Regional Chamber of Commerce stated he was keeping his testimony brief due to the amount of testimony and limited time. (Attachment 6) He said the Chamber stands in strong support of SB339 because they believe it will make Kansas more competitive and successful in its efforts to attract major investment and job creation in the state of Kansas. Manufacturing is a major economic contributor to the State General Fund and is the engine for economic prosperity throughout the region and the state.
The Chairman asked members if there were any questions. Mr. Martin answered questions. Senator Francisco had a question for Mr. Martin. He will submit his answer in writing to the committee.
The Chairman missed a proponent and apologized to Sean Khurana
Sean Khurana, Cavern Technologies referred to specific points of the bill he would like to address. (Attachment 7)
First he stated the proposed special pricing for 50MW and above would position Cavern's data center for a large customer segment that we are not currently competitive with today. Second is the proposed Economic Dev. Rider (EDR) of 20% average discount over five years equal to one year of power free for 200 KW projects: Many customers in data center space ramp up slowly and to be able to get discounts in the later years would improve their ROI. We would propose having the flexibility to spread out the incentive over the five years based on customer needs. Third is the EDR of 40% average discount over five years equal to two years of power free for 300 KW projects: We strongly believe that this could be a significant differentiator for Kansas data centers that want to be competitive nationally. We would like to have the ability to spread out the incentive over the five years based again on customer needs.
Chairman Masterson asked if the committee had questions. Mr. Martin and Mr. Khurana both answered questions.
That concludes the Proponent testimony.
OPPONENTS
Todd E. Love, Citizens Utility Ratepayer Board (CURB) (Attachment 8), stated the CURB opposes SB339 because it is contrary to the interests of ratepayers. Indeed, a myriad of problems in SB339 need to be corrected. First, SB339 too heavily benefits the utility at the cost of ratepayers. Secondly, SB339 does not have any of the ratepayer safeguards recommended by the LEI Study. Thus, CURB believes that SB339 needs additional study, input from stakeholders, and substantial revision in order for Kansas to adopt best practices for EDRs.
Mr. Love then went on to say that regarding the fact that SB339 rewards the utilities' shareholders at the cost of ratepayers, decision-makers must remember that the obvious problem that gives rise to SB339 is that Evergy's rates are not regionally competitive. These rates chase industrial consumers out of the State. In fact, the LEI study acknowledges that stakeholders have noted that Evergy's high utility rates discourage industrial customers from building or expanding business in Kansas. Importantly, Evergy's ratepayers, who pay these high utility rates, did not cause that problem.
Jeff McClanahan, Kansas Corporation Commission stated that Staff's opposition to SB339 is based on the following factors:(Attachment 9)
- SB339 does not comport with the majority of London Economics International recommended key considerations in designing economic development riders (EDR).
- SB339 does not comport with all of the criteria established in the Commission's order on the proper ratemaking treatment for revenue losses related to competitive discounting and the development of criteria to review and evaluate discounted rates.
- Stakeholders should have an opportunity to research the EDRs in neighboring states and perform other relevant research to determine best practices. Therefore, it is premature to pass legislation on EDRs.
In conclusion Staff suggests the stakeholders should take a collaborative approach by sharing and analyzing information on EDRs between now and the next legislative session to determine the best economic development mechanism(s) for Kansas.
There were no questions for the Opponents.
NEUTRALS
Leslie Kaufman, Kansas Electric Cooperative, Inc.stated as SB339 stands before you now, we are neutral on the bill, but we do respectfully request a clarifying amendment. (Attachment 10) She stated that this amendment is just to clarify that nothing in this bill would somehow accidentally pull them in and impede their ability to do their own rate making and their own economic rate making.
There were no questions.
WRITTEN ONLY - PROPONENTS
Curtis Sneden, Greater Topeka Chamber of Commerce (Attachment 11)
Whitney Damron, Liberty Utilities (Attachment 12)
Tim Cowden, Kansas City Area Development Council (Attachment 13)
Tim McKee, Olathe Chamber of Commerce (Attachment 14)
Ashley Sherard, Lenexa Chamber of Commerce (Attachment 15)
Jeff Fluhr, Greater Wichita Partnership (Attachment 16)
Kevin Walker, Overland Park Chamber of Commerce (Attachment 17)
Eric Stafford, Kansas Chamber (Attachment 18)
Chairman Masterson closed the hearing on SB339
