Freeze fallout: higher electric bills for Wichita while KC customers will get refunds
A vast swath of Kansas including Wichita will see higher electric bills next year because of this February’s deep-freeze, while power customers in the Kansas City area will get refunds on their bills.
Both areas are served by Evergy, the two-state utility giant created in the merger of Westar Energy and Kansas City Power & Light in 2018.
But Evergy Inc. is an umbrella holding company of several subsidiaries that it calls divisions. Each division has a different set of power plants and different rates — and they saw different impacts from the winter weather emergency.
Evergy’s Kansas Central Division, the area formerly served by Westar Energy, had to spend an additional $100 million during the winter emergency to buy power from other utilities to supply its customers. Major cities affected include Wichita and Topeka.
Meanwhile, Evergy’s Metro Division, the former Kansas City Power & Light territory, was able to not only meet its customers’ power needs, but also generated surplus power to sell to other utilities that were having trouble keeping up with demand. It actually netted $60 million on those sales to other systems as prices spiked.
The Metro division includes Kansas City suburbs such as Olathe and Overland Park, along with much of Kansas City, Mo.
Under a policy of the Kansas Corporation Commission, the state utility regulation board, the costs or income from off-system power transactions eventually passes through to customers.
That means the Evergy Kansas Central customers are on the hook for the extra $100 million Evergy spent buying them power. They’ll pay that back in higher bills.
The Evergy Metro customers will get rebates for the $60 million that Evergy made selling power to other systems.
Savings depleted
When Westar merged with KCP&L, the utilities estimated that it would result in lower bills for customers because the larger company would become more efficient and eliminate a lot of duplicated effort.
The February emergency “more or less wipes out the savings relative to the merger,” said David Nickel, chief consumer counsel for the Citizens’ Utility Ratepayer Board. “They estimated $150 million worth of savings” overall. But the extra February costs “more or less takes care of that” for the Kansas Central customers.
Wichita Mayor Brandon Whipple said he was surprised that the freeze would wind up costing one set of Evergy customers and benefiting another.
He suggested the Legislature might need to look at how the power companies are organized..
“Why don’t they legislatively make that into one pot or something?” which would help even out the differences between Evergy’s divisions.
Electric companies file with the KCC each year to recover their costs of purchased fuel and power, said Evergy spokewoman Gina Penzig said.
That won’t happen until 2022.
Reasons unclear
Exactly what caused one side of the Kansas power system to struggle to meet demand while the other side could sell surplus electricity will be part of an upcoming investigation by the KCC.
Neither the state nor Evergy has shed much light on that yet.
But Penzig did confirm that the generating sources from each division are about the same as they were when they were separate companies.
“The costs and credits related to the extreme cold event are a result of the differences in each area’s available mix of power plants and fuel requirements alongside having enough power to meet customers’ needs,” Penzig said in an e mail.
Both divisions use a mix of coal, gas, nuclear and wind generation.
Evergy Kansas Central has a total generating capacity of 5,825 megawatts and 720,500 customers, according to Evergy’s recent annual report to the federal Securities and Exchange Commission.
Evergy Metro can generate 4,100 megawatts for its 565,800 customers, the report said.
The document indicates Evergy Kansas Central relies more heavily on wind than Evergy Metro.
Both wind and coal had problems during the February freeze. Wind turbines experienced problems with icing and coal plants’ fuel reserves were wet and frozen, reducing generating efficiency.
Evergy briefly addressed the cause of the higher electricity prices in its SEC report:
“This winter weather event resulted in an increase in the demand for natural gas used by the Evergy Companies for generating electricity and also contributed to the limited availability of other generation resources, including coal and renewables,” the filing said.
Alongside the KCC investigation, federal officials are planning to investigate why prices for fuel, especially natural gas, rose to as much as 200 times normal levels on the open market during the freeze.
Both investigations are expected to take months.
More pain to come
Nickel said it’s too early in the investigation to do the math and try to put numbers on the amount the average electric customer can expect to pay for the big freeze.
The KCC has already announced that at the very least, the utilities will have to let customers pay on an installment plan, he said.
“Where Evergy Kansas Central is concerned, take into account that they’re probably going to smooth these numbers out over a reasonable period of time,” Nickel said. “It should not impact any customer in such a way that their energy becomes unaffordable.”
But the financial pain to Kansas utility customers will only get worse as a second and much larger wave of natural gas bill increases work their way through the system.
One Gas, the parent company of Kansas Gas Service, reported to the SEC that it spent $2.2 billion in February to buy gas for its customers — four times what it spent for gas in all of 2020.
One Gas customers are spread across three states — Kansas, Oklahoma and part of Texas — and the company has yet to disclose how much each state’s ratepayers will end up owing.
One Gas has already taken out a loan to pay its bills to suppliers while it waits to recover the cost from its customers over time, its SEC filing said.
Nickel said in the end, the extra $100 million that Evergy Kansas Central customers will have to pony up for last month’s electricity is going to be a drop in the bucket.
“Where Evergy is compared to our natural gas utility, there’s no comparison, the numbers are so much less,” Nickel said. “Some of these (gas) costs are just phenomenal.”
This story was originally published March 7, 2021 at 5:01 AM with the headline "Freeze fallout: higher electric bills for Wichita while KC customers will get refunds."
