It’s been more than one year since Winter Storm Uri wreaked havoc across Kansas and other parts of the U.S. with historic freezing temperatures. The long and brutal storm had an unprecedented impact on supply, demand and market pricing for natural gas. Since that time, we’ve been working diligently with our state regulators and stakeholders to minimize the financial impact on customers from high fuel costs during the storm.
Our plan to save customers money is securitization.
Below are answers to questions you may have about securitization and our request with the Kansas Corporation Commission (KCC) to issue securitized utility tariff bonds.
1. What is securitization?
Last year, the Governor of Kansas signed the Utility Financing and Securitization Act. This legislation allows utilities to ease the financial effects of the extraordinary costs created by Winter Storm Uri by issuing ratepayer-backed bonds (i.e., securitization). Utility customers repay the bonds over a longer, more manageable time frame, which results in lower monthly bill impacts.
2. What is the purpose of our most recent KCC filing associated with last year’s winter storm?
We’re requesting to establish a securitization mechanism to recover extraordinary costs the company incurred in February 2021 by retail sales customers over an extended period.
Without securitization, customers would have paid more than $500 extra on their April 2021 bills. The securitization approach will result in the cost being spread over a more extended period.
3. How much is Kansas Gas Service proposing to recover through securitization?
The total estimated cost for securitization is approximately $390 million, including carrying costs. This amount is subject to update or true-up during the Financing Order proceedings.
For the average residential customer, the filing provides a range of five, seven, 10 or 12 years, for recovery of costs associated with Winter Storm Uri. The fixed monthly charges range from approximately $5 to $9.
Compared to traditional regulatory methods, we estimate that securitization will save customers approximately $59 million - $100 million, depending on the recovery time frame approved by the KCC.
4. When would a settlement fee apply?
Statutory requirements for the company to issue bonds include KCC approval of a nonbypassable securitized utility tariff charge to be paid by retail sales customers. The proposed settlement fee in our filing would only apply to retail sales customers who switch to transportation services. It would be based on the present value of the expected charges the customer would have paid as a sales customer over the remaining period the securitized utility tariff charge is being recovered.
5. What happens if Kansas Gas Service receives federal or state governmental relief associated with the winter event?
We’ll pass those payments on to customers, even if those payments are received after the expiration of the securitized utility tariff charge.
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