Battle between urban and rural power providers could hit electric bills across Kansas

Two companies that have long been partners in providing Kansas electric power are locked in a battle over who should pay for what — and the outcome could affect your bills.

The dispute, which will be resolved by federal energy regulators, pits rural Kansas customers who get their electricity from member-owned cooperatives against Evergy, a for-profit company and the dominant electric utility in the state.

At stake is as much as $27 million that the Kansas Electric Power Cooperative, known as KEPCo, says it’s being overcharged by Evergy for operation and maintenance of power plants that Evergy runs but that supply power to both companies’ customers.

In a recent complaint to the Federal Energy Regulatory Commission, KEPCo claims that Evergy miscalculated those charges for the 2021-22 fiscal year.

“KEPCo submits that Evergy KC (Kansas Central) has not correctly input the cost and revenues in the VOM (Variable Operation and Maintenance) Revenue Requirement and, as such, its proposed rate for the Current Contract Year is not just and reasonable,” the KEPCo complaint said.

Many details of KEPCo’s complaint have been shielded by Evergy as private business information, but the public version of the complaint indicates that Evergy is charging KEPCo $64.8 million for operation and maintenance this year, up from $44.7 million in 2020 and $35.2 million in 2019.

In a report last week to the Kansas Corporation Commission, KCC staff attorney Carly Masenthin said KEPCo is asserting that the operation and maintenance charge should actually be about $37.68 million.

Although federal regulators will decide the case, the state commission voted last week to seek to intervene as an interested party representing Kansas utility customers.

The outcome will eventually affect electric bills paid by the customers of 16 rural co-ops that get power from KEPCo and customers who get their power from Evergy Kansas Central, the territory that was served by Westar Energy until a 2019 merger with Kansas City Power & Light.

KEPCo’s member utilities, which are also co-ops, provide power to a wide swath of Kansas.

While Wichita is in Evergy Central Kansas territory, south-central Kansas KEPCo member utilities include thousands of rural customers in Sedgwick, Butler, Sumner, Cowley, Reno and Kingman counties.

Although Westar and KCPL are now parts of the same company under the Evergy umbrella, they remain separate entities for ratemaking purposes.

“Any amount recovered from KEPCo is basically a credit to Evergy’s retail customers and any amounts not recovered from KEPCo would be extra amounts that the (Evergy) retail customers would have to pay,” said KCC Chairman Andrew Finch.

The KCC sets Evergy’s rates but doesn’t have jurisdiction over electric co-ops, which are not-for-profit entities owned by the customers. Co-ops largely regulate themselves with their member-customers having the right to elect or vote out the people who run the utility.

The KCC is not taking sides in the KEPCo-Evergy dispute, French said.

“In my opinion, we’re not there to protect Evergy’s retail customers, we’re not there to protect KEPCo,” he said. “Because after all, the vast majority of everyone affected by these rates, they’re all Kansas ratepayers whether they are KCC retail jurisdictional ratepayers or whether they’re ratepayers of co-ops.

“We are there to protect the interest of all Kansas ratepayers. Our interest is in making sure these rates are calculated correctly and that all Kansas ratepayers are treated fairly.”

In addition to alleging miscalculated rates, KEPCo’s complaint claims that the increase is unexpected, based on commitments to reduce operating costs that Evergy made to the state in the 2019 merger and later to Elliott Management, a Florida-based international hedge fund that has invested heavily in Evergy and has largely taken control of its financial operations.

KEPCo also alleges that Evergy forced the FERC complaint by failing to meet contractual deadlines to try to work out disputes without regulator intervention. KEPCo claims that puts it at a disadvantage because it is much smaller than Evergy, with far fewer resources for pursuing legal action.

Evergy officials would not discuss details of the complaint, citing company policy against commenting on ongoing FERC issues.

However, the company did release a statement saying it believes it correctly calculated KEPCo’s charges.

“KEPCo is an important energy supplier in Kansas and a co-owner of multiple power plants with Evergy — including the Wolf Creek nuclear power plant,” the statement said. “We will continue to work towards resolving all of the issues raised by KEPCo according to federal regulatory law and in a way that does not inappropriately and negatively impact Evergy’s retail customers.”

A KEPCo attorney did not return phone messages seeking clarification and to reconcile apparent errors between the FERC complaint’s written narrative and numeric charts provided as backup materials.