Evergy Kansas customers oppose electric rate increase amid high profit - The Topeka Capital-Journal

Evergy Kansas customers oppose electric rate increase amid high profit

Topekans aren't happy about Evergy's plan to raise electric rates. Will regulators listen?
Jason Alatidd

Evergy customers told state regulators they don't want to pay more money to the electric utility, especially as the monopoly's investors benefit from healthy profits.

Evergy is seeking a net revenue increase from retail ratepayers of $218 million across its Kansas central and metro regions. The company estimates that an average homeowner or renter in the central region, which includes Topeka, would pay an extra $14.24 a month on their utility bill.

The Kansas Corporation Commission, which will to make a decision in either December or January, held a three-hour public hearing Tuesday evening on the matter at the Washburn Institute of Technology in Topeka.

Speakers found a common theme of opposing paying more money to Evergy while the company is also paying out more cash dividends to investors. Many people also raised environmental concerns and worried about how increased utility bills would affect people with low incomes and retirees on fixed incomes.

Monopoly's shareholder profits irk Evergy customers

KCC staffer Carly Masenthin said Evergy is a natural monopoly due to the economic circumstances of electric utilities, but electricity is also arguably the most important resource in the modern world.

"Electricity is too important of a resource to be left entirely to the competitive and private market," Masenthin said, adding that "it also isn't the most efficient thing for a government to try and take on the task of fully providing for the electric grid."

Evergy exists as a company where profits go to investors and its exclusive monopoly territory is protected by the state, but it must abide by heightened government regulation — including KCC control over if and how much the company can raise its rates.

She also acknowledged that the industry has a bottom line.

"You can call that what you want, but without a profit margin, there's no reason for any industry to exist ever," Masenthin said, adding that legally, Evergy must be allowed to earn a reasonable profit.

Evergy posted record profits last year. The company's adjusted earnings totaled $854 million in 2022, translating to $535 million in cash dividends at $2.37 per share paid to EVRG stockholders.

The company plans to pay out 60% to 70% of its net income in dividends to shareholders, which is generally considered above average but is in line with utility stock dividend payout ratios.

Ratepayer Daniel Wornkey asked "does Evergy not feel that that profit margin is reasonable?"

"We are a private organization that goes out and finds the shareholders and acquires the debt to invest in the assets in the state to provide service," said Darrin Ives, Evergy's vice president for regulatory affairs, defending the company's level of shareholder returns. "We have to be able to pay our shareholders for the use of their funds and to pay our debt providers for the use of their funds."

Ives said returns for Evergy stockholders "have lagged our industry over recent years, partly because we've had lower returns in Kansas over the last five years than we were authorized to have."

"While Evergy posted record profits last year, paid higher dividends to shareholders, Kansas consumers will have to pay more so Evergy and its shareholders can continue to live high on the hog," said Tad Kramer, of Big Springs, suggesting the company should reduce executive salaries and shareholder dividends. "Although Evergy is a public utility, it's not a welfare program for investors."

Senior citizens on fixed incomes fear utility rate hikes

Glenda DuBois, of AARP Kansas, urged commissioners to keep older Kansans in mind.

"The utility is requesting a significant increase in what consumers might pay towards Evergy's annual corporate profits," she said, "and asking that the currently authorized return on common equity be increased significantly from 9.3% to 10.25%. We ask that you treat residential customers more fairly with regard to class allocation and rate design."

Ella Dawson urged commissioners and Evergy to think of seniors on fixed incomes amid rising costs, telling them that "$14 to you all is like a drop of rain, but to us that's a lot of money."

"Sounds like stockholders are making money off of us when we cannot even afford to have a decent life," Dawson said. "... We can't afford to be stockholders. If we could, I would get into it, buy me some of that stock and get that cash money."

Jim Long, of Topeka, suggested that Evergy should instead cut staff salaries.

"I can't afford $14.24 a month," said Topeka resident Jim Long. "I live on Social Security and KPERS. And neither one of them have gone up as much as Evergy has in the last 20 years. I haven't had an increase in KPERS since I took it out in 2002. I have to take a job at 80 years old to pay my bills. I'm against the rate increase. Reduce it."

Environmentalists want greater investment in renewable energy

Commenters also urged greater emphasis on environmental concerns.

"Originally, I was not upset about the rate increase," said Kate Hamilton, of Topeka, because she understood that increasing renewable energy "is going to take a major investment for the transition."

But now she views Evergy as backing away from its commitments on renewable energy.

Ives defended the company's integrated resource plan for identifying "the right mix of resources to serve customers and deliver it at the lowest possible cost." He said the increased need for natural gas is due to supply chain delays in adding solar and wind while also seeing increased consumer demand, citing a proposed Panasonic battery plant in Johnson County as an example.

"We recognize that it's going to take a mix of all solutions to provide supply to customers and provide it reliably and affordably," Ives said.

Danielle Twemlow, of Topeka, suggested the federal funds for renewable energy from the Inflation Reduction Act could lower costs for Evergy customers. Ives said Evergy will participate "to the extent that we can," but just because federal programs have been announced doesn't mean the money is available now, let alone the details on how the government will make the money available.

Zack Pistora, of Linwood and a Sierra Club lobbyist, asked if impacts to public health and the environment will be considered. KCC staffer Justin Grady said that, for the most part, they don't directly affect the rate case. However, they are accounted for in long-term resource planning.

"The effect of the utility's resource decisions in terms of emissions, emission limits, the potential environmental retrofits on the generating resources, the reliability of those resources, the ultimate cost, minimizing the ultimate cost to customers — it's not an easy balancing act," Grady said.

"What bothers me most is that Evergy's rate request coincides with new plans of prolong its most expensive and polluting power: coal," Pistora said. "Delaying coal plant retirements, as you know, adds greater fuel and maintenance costs to customers."

But Ronald Ray, of Maple Hill, took a different stance on renewable energy, accusing Evergy of political motivations.

"Their choices here are geared more towards putting into practice the cultural communism of the Green New Deal, which is being foisted upon us by the new world order," he said.

Reliable service is also a priority

"This is a significant request in Kansas to continue to provide the reliable service needed by our central customers," Ives said.

Central region customers would pay an extra $204 million a year, or about 10% more, though there would be variation among classes of ratepayers.

"We know that our customers would strongly prefer to not face cost increases," Ives said, touting cost savings from the merger and electric rate increases below the rate of inflation.

The merger of Westar Energy and Kansas City Power and Light into Evergy was expected to save the company $620 million. It has actually saved $1 billion so far, Ives said.

"We must continue to appropriately balance affordability and reliability and providing service to our customers," he said.

David Nickel, consumer counsel for Citizens' Utility Ratepayer Board, said Evergy is required under state law to "furnish reasonable, adequate and sufficient electric service at just and reasonable rates and conditions."

"While low rates are really important, reliability is also important," Nickel said. "We want our electric service to be continuously on, despite high winds and ice storms throughout effigies territory, regardless of the 110 degree heat or the subzero cold, and not withstanding the highs and lows of customer demand. We acknowledge that this obligation requires investment in electric generation plants, transmission lines, distribution lines, a workforce and other items of capital expense."

Who is looking out for ratepayers?

Staff for both the KCC and CURB said they are still reviewing the information and have not come to their own conclusions on Evergy's proposal. Their perspectives are due Aug. 29.

Nickel said CURB has hired experts to analyze the question of what reasonable rates would be. In the past, CURB has raised concerns with reasonableness of rates, capital investments and rate of return on shareholder equity.

Nickel said the agency tasked with advocating for residential and small business ratepayers is especially concerned about how Evergy's rate hikes would affect low-income and fixed-income people. They will "attempt to keep Evergy's rates as low as legally permissible."

More: Evergy wants to charge you $14 more a month in raising $218 million from Kansas customers

KCC staff is tasked with balancing competing interests.

"Particularly we're looking to try and find a balance between Evergy shareholders and its ratepayers, as well as ratepayers of today and the future," Masenthin of the KCC said.

Michael Brosch, of Leawood, previously worked as president of utility regulation consulting firm Utilitech. He said he believes Evergy's proposed return on equity is excessive and that the company looks to make ratepayers bear costs and risks.

Brosch, who also previously worked at Missouri's regulatory body, offered his services to KCC staff.

The case could ultimately be settled for a lower increase than Evergy asked for through an agreement, potentially supported by KCC and CURB, but higher than what some other parties may prefer. Evergy customer Roger Hundley, of Lecompton, thinks the history of settlements has resulted in Evergy increasing its initial ask.

"They come for an extravagant amount of money, and they seem to walk away with about half of what they asked, which is probably what they really came to get," he said.

Will regulators listen to consumer complaints?

The commissioners thanked people for attending the public hearing and voicing their thoughts.

"The Legislature has charged the commission with the responsibility of protecting the rights of all interested parties, including those of the general public," said commission chair Susan Duffy. "We want to hear your comments, they are important to us and that's why we are here tonight."

People who missed the hearing also had opportunity to speak Thursday in Overland Park and July 27 in Wichita. Public comment can also be submitted online, by mail or by phone. Public comment is due Sept. 29. More information is available at www.kcc.ks.gov/your-opinion-matters.

"This is an important part of our process for these types of proceedings," said Commissioner Andrew French. "And the commission often takes comments into account in its review of the case."

Jason Alatidd is a statehouse reporter for the Topeka Capital-Journal. He can be reached by email at jtidd@gannett.com. Follow him on Twitter @Jason_Alatidd.