THE FACTS ABOUT KANSAS ELECTRIC RATES

Electric rates in Kansas have received plenty of attention recently. But what are the facts?
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Retail Wheeling is Not a Solution

One of the items being studied as commissioned by the 2019 Kansas legislature is whether “competitive markets for retail electricity can benefit all Kansas consumers.”  Sometimes referred to as retail wheeling, knowing the experience in other states, it is hard to imagine an objective consultant could conclude anything but “buyer beware.”

Retail wheeling would require consumers to choose their provider of electricity.  Most likely, your current electric provider would still be responsible for maintaining and operating the poles and wires to deliver electricity, but consumers would need to evaluate different rate plans and carefully select another company to secure the kilowatt-hours needed to keep their lights on.

We regularly hear proponents tout the Texas model and, of the states that have approved retail wheeling, it is probably the most active and could provide some good lessons.  Unfortunately, those lessons include brownouts in 2011, 2014 and 2015.

Brownouts are often coupled with higher prices and clearly a market price doesn’t mean a lower price. On Aug. 12 this year, the Texas wholesale electricity price spiked to $9,000 a megawatt-hour.  And it wasn’t a lone event in the Lone Star state.  Over a few days, the price averaged $6,537.45, a 36,000% increase.

That same day, Kansas wholesale prices averaged $35 a megawatt-hour. Do we really want to be exposed to such a volatile energy market?

A penny for your thoughts

Most people only think about the cost of electricity when the monthly bill arrives. It may be hard at that time to recognize the value it represents – four full weeks of heating and cooling comfort, refrigeration, lights, meal preparation, clothes washing, drying and ironing, television and other media entertainment, computer, internet and cell phone charging. Electricity has simplified household and professional chores and improved the quality of life – and our life expectancy.

And you can still get significant value out of a few cents’ worth of electricity. You can power a 9-watt LED lightbulb – the equivalent of a 60-watt incandescent bulb – 12 hours for just a couple pennies. A penny’s worth of electricity will power a microwave for about 4 minutes and a desktop computer for nearly 30 minutes.

Where else can you get that kind of value? The government can’t even make a penny for a penny anymore. According to the U.S. Mint, it now costs 1.5 cents to produce one.

Value can also be measured in other ways. Investments by utilities in environmental and regulatory upgrades have cut emissions and cooperatives in Kansas are leaders in emission-free energy production. For example KEPCo provides its 19-member cooperatives more than half their energy supply from emission-free sources.


READ KCC STUDY HERE

Electric Cooperatives Support Renewable Energy

Rural Kansas expects and deserves an energy generation mix made up of varied sources. The rural electric cooperatives of Kansas invest in and generate energy from wind, solar, hydro, nuclear, natural gas, and coal every day for our members to insure safety, affordability, and reliability.

Co-ops are required to serve all members during times of peak demand, but they serve solar customers in a very unique way.

Using the cooperative only as a “back-up” still creates costs for the utility.

Fixed costs for connecting distributed generation such as solar remain constant, even if an individual’s energy purchases decline.

Solar customers make an individual investment in private generation, and we are happy to serve their energy needs, but other non-solar customers must not subsidize those users.

The Cooperative Difference

Members of Electric Cooperatives express higher than average levels of customer satisfaction. For good reason, Electric Cooperatives are different from other forms of business, and member-owners of cooperatives notice this difference. Here’s why:

  • Co-ops put consumers first because the consumers are the owners. In addition, co-ops are locally owned and operated.
  • When members call their co-op, they are talking with their neighbors.

Both of these aspects combine to make co-ops more responsive because members are the owners, and each co-op is accountable to their neighbors and community.

Working to Protect Our Members

As the Kansas Legislature continues to discuss the future of energy in our state, we continue to prioritize the best interest of more than 280,000 consumer-members across Kansas.

SB 69, passed by the 2019 Kansas Legislature, authorized a study of 29 topics that may uncover some opportunities for utilities and customers to manage electricity costs in the future.  While the study may provide some useful insights, we remain cautious that the study may result in continued efforts to benefit large industrial consumers at a cost to Kansas residential customers.   We will work to ensure that any policy solution should include a benefit to all Kansas electric utility consumers, rather than selecting winners and losers.

Texas energy prices spike as demand strains grid

Texas’ grid operator is warning of a potential power emergency as extreme heat sends electricity demand and prices skyrocketing to record levels.

With temperatures in Dallas approaching 100 degrees, the Electric Reliability Council of Texas warned that it was increasingly likely the electricity system could experience shortages — a prospect that could prompt regulators to ease environmental restrictions and allow generators to run at maximum capacity. The region’s power supply cushion has fallen close to 2,500 megawatts, less than 5% of total demand on the system.

Wholesale electricity prices have shot up by as much as 21,147% to $3,848.69 a megawatt-hour across the Texas grid. On Monday, they jumped 36,000% to average as much as $6,537.45 a megawatt-hour across the Texas power grid. It’s a record that has turned the Lone Star State into the most expensive place to buy power in all of America’s major markets.

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ENERGY MARKETS IN TEXAS SUFFERED

A special interest group behind a controversial proposal to deregulate Florida’s energy utilities is working hard to breathe new life into the flagging campaign to put the measure on the November 2020 ballot. If approved by Florida voters, household utility customers will lose the option to purchase electricity from their current provider, and will be forced to choose new suppliers for electricity on the open market.

In recent weeks, the group behind the campaign, Citizens for Energy Choices, has pushed a messaging strategy touting the so-called “Texas model,” which they claim is something Florida should strive to emulate. But Texas adopted a deregulation scheme almost two decades ago, and that state has been plagued with problems ever since – ranging from a massive and likely unrecoverable surge in household electricity costs, to a spike in consumer complaints.

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financial impact estimating conference: principal's workshop

This is a workshop on the petition initiative entitled Right to Competitive Energy Market for Customers of Investor-Owned Utilities; Allowing Energy Choice.

WATCH IT HERE

#KSEnergyFacts Supports A REALISTIC ENERGY PLAN

The Electric Cooperatives across Kansas support a realistic energy plan. Read the most current version of the bill here.

Read Realistic Energy Plan

The Facts

Retail Wheeling is Not a Solution

A penny for your thoughts
Electric Cooperatives Support Renewable Energy
The Cooperative Difference
Working to Protect Our Members

Texas energy prices spike as demand strains grid

Energy Markets in Texas Suffered

financial impact estimating conference: principal’s workshop

The Value of Electricity

RETAIL WHEELING IS NOT A SOLUTION

Discussions on restructuring the way consumers purchase the generation component of their electric bill, a system called retail wheeling, often ignore detrimental impacts experienced in other states. Dozens of energy providers will offer multiple rate plans and marketing schemes which often lead to consumer protection issues. And in most states with retail wheeling, rates are still higher than those in states retaining a rate structure similar to Kansas. Most importantly, a market price doesn’t mean a lower price. Energy prices in a restructured industry can be very volatile.

Service Territory Map of Distribution Cooperatives in Kansas

Advocates claim that retail wheeling will benefit consumers, but experience and research shows this form of deregulation results in complication without a guarantee of cost savings.
A market price doesn’t mean a lower price. It means being subject to the fluctuations of a volatile energy market that may be attractive today but could be wildly different in the future.
Utilities in states with retail wheeling have had to divest their generation resources and, in turn, invest heavily in public education campaigns and marketing departments to communicate with potential customers. Advertising budgets balloon. Power suppliers come and go, creating a possible consumer protection issue.

Bringing you the facts about electric rates

Electric rates in Kansas have received plenty of attention recently. But what are the facts? It’s true that some Kansas utilities have been regularly increasing rates for several years and now average electric rates are higher in Kansas than our neighboring states. It’s also true that special interest groups are active in the media and the Kansas Statehouse calling for utilities to slash electric rates.
It’s not true that such a step would lower rates for your electric cooperative.

What can be done?

The Kansas Corporation Commission, in a 220-page study released this year, identified the causes of rising rates and notes that a settlement related to the merger between KCP&L and Westar includes a promise of no rate hikes for five years. Most electric cooperatives have been able to hold rates steady for all classes of customers over the past few years despite many cost pressures from regulatory requirements and obligations to construct and pay for transmission that serves wind resources generated in Kansas but delivered to other customers in other states. Fixing that subsidy for wind would be one relief. Other things to review should include state laws which created some subsidies and shortcuts for energy development that may have run their course. The Kansas Legislature could cut utility bills for businesses by phasing out the 6.5 percent sales tax they pay on energy when no sales tax is collected on residential bills. In addition, The Kansas Constitution assesses utility property at 33 percent but other business property is assessed at a 25 percent rate.

Is the Kansas Legislature Working on This?

Legislators are being asked by special interest groups to consider sweeping and punitive legislation that could benefit those groups but have a negative impact on industry reliability, rates and customer service. There are certainly some more measured ideas that could be reviewed as part of a discussion among legislators, regulators, utilities and other affected parties.

As a part of that review the 2019 Legislature passed SB 69 to study 29 utility issues unique to Kansas.  The study that will be before the legislature in January 2020 should be a starting point for discussion of what is best for Kansas ratepayers.

We should explore our current energy picture and work toward a balanced energy policy for the future. It deserves a deliberate and respectful process that will take some time, but our energy future is worth the investment. After all, we all have the same goal – for Kansas to continue to be a great place to work, play, raise a family and call our home.

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JOHN DOE

Environmental policy expert and founder of Environmental Progress

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