What does the KCC Order Mean to Customers?
On Wednesday, February 8, the Kansas Corporation Commission released an Order that will allow Kansas Gas Service to apply for a Financing Order associated with Winter Storm Uri—but what does that mean for our Kansas customers?
The first and most important thing to know is that this Order and those before it are not reflected on your current bill. If you’d like to learn more about how to read you bill, you can check out this helpful post, and if you’d like to learn more about the cost of gas and what you see on your bill, you can check out this blog post answering customer questions.
Winter Storm Costs Deemed Reasonable and Prudent
The settlement agreement approved February 8 concludes that extraordinary costs incurred by Kansas Gas Service to maintain safe and reliable service for Kansans during the February 2021 winter storm event were reasonable and prudent. This approved plan saves customers approximately $55 million as a result of Kansas Gas Service’s agreement to reduce its allowable carrying charges on the extraordinary costs below the Commission-authorized level.
What Happens Next?
The next step will be for Kansas Gas Service to apply for a Financing Order to minimize the effects on customers’ bills through securitized utility tariff bonds in 2022.
Once this is established, we predict residential bills are estimated to increase between $5 to $9 per month depending upon the length of time for which securitized utility tariff bonds will be issued. The additional charge will not appear on customer bills until late in 2022 or early 2023.
Answers to Your Top Questions
What is the purpose of this settlement agreement?
The settlement agreement represents a proposed resolution to Kansas Gas Service’s plan filed in July 2021 to ease the financial effects on customers from the unprecedented February 2021 winter storm event. Securitization has proven to be a low-cost capital option compared to traditional financing, which commonly carries higher interest rates.
What significant terms are included in the settlement?
The settlement agreement identifies that approximately $366 million in extraordinary costs, excluding carrying costs, incurred by Kansas Gas Service to maintain safe and reliable service for customers during the winter storm event were reasonable and prudent.
Kansas Gas Service agreed to lower the applicable carrying charges on the extraordinary winter storm costs, below the Commission-authorized level, saving customers approximately $55 million.
Terms of the agreement include crediting to Kansas Gas Service sales customers any financial relief ordered by a federal or state court or governmental agency due to market manipulation during the winter event. Kansas Gas Service also expects to propose a tariff to assist low-income customers in the coming months.
Kansas Gas Service will apply for a Financing Order in a separate proceeding to minimize the effects on customers’ bills through securitized utility tariff bonds. The KCC will determine the terms of the bonds at that time.
What are customers actually paying for through this filing?
This filing includes extraordinary gas procurement costs during the February 2021 winter storm event necessary to ensure reliable natural gas service to our customers. These costs include financing and other expenses incurred to secure and pay for natural gas volumes during the event, extraordinary operations and maintenance expenses and the company’s legal and consulting expenses related to items such as gas purchase disputes, the securitization process and this proceeding.
The Order also established that the amount of extraordinary cost excludes $14.9 million from a disputed invoice with one of the company’s gas suppliers. If the dispute is resolved prior to the separate Finance Order filing, the resolved amount, if any, will be included. If not resolved prior to the filing, Kansas Gas Service can seek future recovery in a future regulatory action.
Why does Kansas Gas Service plan to file for approval to issue Securitized Utility Tariff Bonds?
Securitization allows gas cost-related debt and other extraordinary costs related to the winter storm to be paid over a longer, more manageable timeframe, which results in lower monthly customer bill impacts. Securitization has proven to be a low-cost capital option compared to traditional financing, which commonly carries higher interest rates.
Under the settlement, Kansas Gas Service’s recovery plan provides a range of five, seven or 10 years, with fixed monthly charges for the average residential customer ranging from approximately $5 to $9. The KCC will determine the terms during the separate Financing Order proceedings. KGS intends to file an application for a Financing Order in March.
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