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Minutes for SB437 - Committee on Utilities
Short Title
Enacting the Kansas electricity bill reduction bonds act and authorizing the state corporation commission to issue securitized ratepayer-backed KEBRA bonds for electric utility property.
Minutes Content for Thu, Mar 12, 2020
The Chairman had Staff explain SB437 (Attachment 1)
Proponents
Ashok Gupta, Natural Resources Defense Council stated that what you have in this bill is a solution-a tool-to help utilities, regulators, and policymakers transition to less expensive resources while dealing with undepreciated regulatory assets. (Attachment 2) This tool, called securitization or ratepayer backed bonds (RBBs), is not new or controversial. SB437 creates an opportunity for Kansas to take advantage of low-cost ratepayer backed bonds to help consumers and to help manage transitions for utilities.
Why is a legislative proposal needed? To free up the utility's capital for reinvestment in newer resources, and to achieve the most favorable interest rate on the RBBs from investors, national bond rating agencies look to specific authorization by state law and specific regulatory actions for assurance that bond investors will be repaid.
Dorothy Barnett, on behalf of Clean Energy Business Council said the world is engaged in a profound transition in the way we use energy. (Attachment 3) The era of carbon-intensive energy derived from the burning of fossil fuels is coming to an end, and a cleaner, more reliable-energy future based on renewables like wind and solar will be the new normal. In Kansas, our electric generation includes over 15.6 GW of installed capacity as of the end of 2018, with coal, gas and wind as the dominant generation fuels and technologies. As of 2018, coal-fired generation capacity comprised 30% and gas-fired generation was 24%. Wind energy made up 34%, more than ten percent higher than the global average for renewable energy.
As clean energy advocates, we believe this bill could have lasting beneficial effects on both utility scale and distributed renewable energy as we transition to clean energy at a more rapid pace. We support securitization, with appropriate open and transparent processes managed by the Kansas Corporation Commission.
Zack Pistora, Kansas Sierra Club stated that they support SB437 which authorizes energy securitization, or what I like to call 'utility asset refinancing'.(Attachment 4) This would allow a utility to submit a proposal to the Kansas Corporation Commission to issue securitized bonds for ratepayers to pay down debt on uneconomic energy assets with lower interest, thus saving ratepayers money. Because existing coal plants in Kansas are costing ratepayers many millions more in added costs (despite being run at marginal capacity), we need securitization as a ratemaking tool, right now.
Mr. Pistora said they do offer a few ideas for improvement to SB437 which he has included in his testimony. He concluded by saying he would encourage this committee to pass SB437 this year. With securitization, therein lies a special opportunity for our state to allow for a dynamic ratemaking tool and create a significant upshot for Kansans in terms of our electric rates and energy future.
Paul Snider, Kansas Industrial Consumers Group said Securitization is simply a voluntary financing tool that can help utilities transition away from underutilized assets that may be a drag on consumer rates. (Attachment 5) The financial tool should be available to finance large, unplanned expenditures, such as storm damage, or to simply lower the cost of any utility asset. Section 15 may need to be adjusted to accomplish that goal and we look forward to working with stakeholders to address that and any other issues.
One area where KIC differs from others in its support for securitization concerns what should be done with excess proceeds from securitization (after debts are paid). KIC believes the chief outcome should be rate relief and any additional investments, if needed, should be identified through an Integrated Resources Plan process.
The Chairman asked the committee if they had any questions. Questions were answered by Mr. Snider, Mr. Pistora and Mr. Gupta.
The Chairman then moved to the Opponents.
Whitney Damron, on behalf of Liberty Utilities-Empire District said SB437 would introduce a complex financing mechanism with unproven merit into the realm of cost-recovery financing of utility infrastructure and we believe this will not be beneficial to our customers or the company. Liberty presented similar testimony to this Committee exactly one year ago today in opposition to SB198. Liberty's position on securitization has not changed and we are opposed to SB437 as well. (Attachment 6)
Justin Grady, Kansas Corporation stated the Commission Staff opposes SB437 in its current form; however, we do not oppose securitization as a concept. (Attachment 7) To the contrary, we believe that securitization would be a useful tool for utilities and the Commission to fund extraordinary capital projects or stranded costs.
Mr. Grady said the Staff suggests that any securitization bill that moves forward should not contain the kind of restrictions on the utility's use of the securitization proceeds as are contained in Section 15 of SB437.
Mr. Grady listed other concerns with SB437.
- Reliability
- Need to Compare this bill to other States
- Language
Darrin Ives, Evergy stated, overall, we believe securitization can be an appropriate tool for utilities to have available to them. (Attachment 8) However, it is not the silver bullet that's often been described. In fact, if used incorrectly, securitization can have negative effects on a utility, its customers and its investors.
We think it's important that we get the language right on securitization. In our view, SB437 misses the mark. However, we do believe there could be value in the future to having securitization as an option.
The Chairman asked if there were questions. Mr. Grady and Mr. Ives answered questions.
Opponents Written Only: Ernest Kutzley, AARP (Attachment 9)
The Chairman moved to Neutral testimony.
David Nickel, Kansas Citizens' Utility Ratepayer Board said CURB is neutral regarding SB437. (Attachment 10). This bill authorizes the use of securitized ratepayer-backed bonds that are designated as Kansas energy bill reduction assistance (K-EBRA) bonds to lower electric bills for Kansas consumers, and to provide transition assistance to Kansas communities and electric generation facilities workers, among other purposes. Under SB437, the use of K-EBRA bonds are not mandated for any purpose. The Kansas Corporation Commission is authorized to approve, modify or deny any application filed by an electric utility to issue K-EBRA bonds.
CURB believes that securitized ratepayer-backed bonds could provide Kansas utilities a means of meeting their regulatory obligations at low interest costs, thereby providing avenues toward lowering Kansas electric utility ratepayer costs. However, as noted below, CURB has not determined that SB437 meets the best practices outlined in the LEI Study.
There were no questions for Mr. Nickel.
Neutral Written Only: Leslie Kaufman, Kansas Electric Cooperatives, Inc.(Attachment 11)
The meeting was adjourned at 2:27pm
