KCC approves settlement agreement allowing Kansas Gas Service to recover winter storm costs over time, using low interest bonds
TOPEKA – The Kansas Corporation Commission (KCC) has approved a settlement agreement outlining how Kansas Gas Service (KGS) will recover $366 million in deferred natural gas costs incurred during last February’s winter weather event. The utility, like others regulated by the KCC, was ordered to do everything possible to continue providing natural gas service to its customers, defer the charges, and then develop a plan to allow customers to pay the unusually high costs over time to minimize the financial impact.
Under the terms of the agreement, KGS will apply for Securitized Utility Tariff Bonds to obtain the most favorable financing to reduce costs to ratepayers. The 2021 Kansas Legislature passed the Utility Financing and Securitization Act, which allows utilities to use securitized bonds to pay for extraordinary costs at more favorable terms than traditional financing. The KCC will review the plan to ensure the lowest possible bond costs will be passed on to customers. The application and review process could take six to eight months.
Until the securitization process is complete, the exact dollar amount KGS customers will see on their monthly bills or the length of the payment period is unknown. Estimates range anywhere from $5 to $7 per month for a period of 5-10 years.
The Commission emphasized it was in the public interest for KGS to incur the extraordinary costs to ensure the integrity of the gas system and ensure continuous service to its customers.
“A lesser response could have resulted in catastrophic property damage and serious public safety implications, including potential loss of life. When extraordinary costs are unavoidable and necessary to benefit the public, it is in the public interest to allow recovery of such costs.”
Feb. 8 order states that any proceeds received by KGS from ongoing federal or state investigations into market manipulation, price gouging or civil suits will be passed on to customers. In addition, KGS has agreed to file a plan to assist low-income customers in its service territory by December 31, 2022.
A second order, addressing a proposed unanimous settlement on a waiver of penalties for gas marketers and transportation customers (large volume users that buy gas directly through natural gas suppliers or marketers using KGS to deliver the fuel) under KGS’ Tariff will be issued by March 7. A hearing on that settlement was held February 4.
Today’s order is available at:
http://estar.kcc.ks.gov/estar/ViewFile.aspx?Id=172a1653-5e64-4ecd-84d9-b42bd4da664a
A recording of today’s Business Meeting featuring comments by Commissioners on this order, is available on the KCC YouTube channel.