WICHITA, Kan. (KSNW) — State regulators say they have a better idea of how much extra Kansas Gas Service customers may have to pay after the historic cold outbreak of February 2021.
In February of this year, the Kansas Corporation Commission (KCC) approved a plan for Kansas Gas Service to recoup $366 million. The company would apply for securitized bonds, and customers would pay $5 to $7 more monthly for an unknown length of time.
On Thursday, the KCC provided an update with a new number. It said Kansas Gas Service is trying to recover $328 million, and the cost for customers will range from $4.87 to $6.42 a month over seven to 10 years.
KSN News did the math and found that the total cost could range from $409.08 to $770.40 per customer.
The KCC said using low-interest securitized bonds is expected to save customers $35 to $46 million compared to recovery through traditional rates. Without securitized bonds, ratepayers would see charges of $13.90 monthly over three years or $9.04 monthly over five years using traditional rate making.
Using those numbers, KSN News found that the total cost per customer could range from $500.40 to $542.40.
We asked the KCC why, with KSN’s math, the securitized bond option appears to have the risk of costing customers more money.
KCC staff sent this response:
“The problem with the math provided is that it assumes the low bill impact is over 7 years, and the higher bill impact is over 10 years. It’s the opposite. Another thing to remember is that we did our savings calculations not only with nominal dollars but also in terms of Net Present Value of customer impact. Because we can spread out the costs for a longer time frame (with low cost bonds versus higher cost company equity that would be necessary to support these longer terms), we are able to lower overall customer costs in today’s dollars (calculated on an NPV basis). It’s well known that a dollar today is worth more than a dollar next year or ten years from now (especially with today’s inflation levels). This tool allows customer to pay back Winter Storm Uri using future value dollars that are worth much less than today’s dollars (or the value of a dollar in Feb. 2021, for that matter).”
The KCC also sent a chart to help explain the reason securitized bonds should save customers money. The KCC said the chart appeared in testimony filed with the KCC by Janet Buchanan of Kansas Gas Service.
The exact amount customers will see on their bills won’t be determined until the bonds are issued. However, when it is finally added to bills, it will be a separate line labeled “Winter Event Securitized Cost.”
The KCC is overseeing the entire process. So far, it does not know when customers will start paying the extra cost.
“Once the bonds are issued, customers will be notified in advance of the winter weather recovery charges appearing on their bills,” Linda Berry, KCC director of public affairs, said.
KSN News also asked the KCC why the amount Kansas Gas Service wants to recover dropped by $38 million since February.
Berry sent us this reply:
“According to our staff auditors, the difference can be attributed to a number of factors such as continued refinement/revisions to the calculations of extraordinary costs, additional refinement to the estimated costs associated with securitization, including investment banker and auditing costs, updating the carrying cost calculations to include more detail and a more accurate time frame, etc.”
The KCC has said that if Kansas Gas Service recovers any proceeds after state or federal investigations into possible market manipulation and price gouging, the company will pass the proceeds on to customers.