Legislature moves quickly to spare Kansas towns from financial ruin over gas bills

Kimberly Gencur Svaty urges lawmakers to consider the desperate pleas of cities across the state who face financial ruin from natural gas bills that are just now coming due. (Sherman Smith/Kansas Reflector)

TOPEKA — Kansas lawmakers moved with lightning speed Wednesday to pass legislation providing $100 million in low-interest loans to cities facing high utility bills as a result of last month’s extreme cold.

The House and Senate endorsed the plan on the same day the bill received its first hearing, and sent it to Gov. Laura Kelly. The governor said she would sign it into law before she goes home, providing immediate relief to towns across the state who risk losing access to natural gas for heat and power if they don’t pay astronomical bills next week.

“Like all small-town rural America, we just cannot withstand an economic event like we have just been dealt,” said Chris Komarek, city administrator for Ellinwood, population 2,100, in a letter seeking help from lawmakers.

“We are a bedroom community, and a good portion of our citizens are over the age of 60, many of them on fixed incomes and or just making it with with Social Security alone,” Komarek said. “There is no room for increased utility costs.”

The House Financial Institutions and Rural Development Committee heard debate on the newly introduced House Bill 2429 early Wednesday. The legislation provides access to an investment fund controlled by the state treasurer. If federal aid becomes available, cities would be required to pay back loans as a top priority.

Treasurer Lynn Rogers and Amanda Stanley, who represents the League of Kansas Municipalities, appear at a committing hearing Wednesday. The proposed loan program would provide access to $100 million in a fund managed by the treasurer. (Sherman Smith/Kansas Reflector)

The committee engaged in procedural gymnastics to insert the loan program into the contents of Senate Bill 88, which previously dealt with easement boundaries. The panel then approved the overhauled Senate bill as part of a plan to fast-track the measure into law.

Shortly after the committee concluded its work, the House took emergency action to endorse the loan program by a 124-0 vote. The Senate passed the bill on a 37-1 vote in the afternoon.

“This loan program is very important to our cities,” Kelly said during a news briefing at the Statehouse. “It gives them the immediate relief they need to avoid dire financial decisions while we pursue other long-term solutions.”

Sen. Alicia Straub, a Republican from Ellinwood, cast the lone vote in opposition to the bill. She said her constituents were not to blame for volatility in the natural gas markets.

“By accepting these low-interest loans,” Straub said, “in some way, it’s like we are acknowledging that somehow the consumer was at fault for this. I don’t feel that the consumer is at fault. And I don’t feel that consumers should have to pay this in any way.”

Kimberly Gencur Svaty, a lobbyist appearing on behalf of Kansas Municipal Utilities, urged members of the House panel to consider urgent, desperate pleas of cities across the state facing financial ruin from natural gas bills.

“You see words like ‘crippling,’ ‘duress,’ ‘insolvency,’ ‘bankruptcy,’ ‘please do something,’ ‘we need help,’ ” Gencur Svaty said.

Recently published financial statements show producers of natural gas seized an opportunity to make money during an unprecedented week of severe cold last month, the lobbyist explained. As residents from Canada to the Gulf Coast needed more gas than ever to heat their homes, weather-driven problems with pipelines and frozen wells exacerbated chaos in the natural gas markets.

Prices soared, and now the bills are coming due for small towns in Kansas that operated their own utility.

“We have immediate financial crisis right now. Literally, right now,” Gencur Svaty said.

She said all 53 cities that operate their own natural gas utility will need assistance, as well as 40-50 cities that operate as their own electric utility.

Dozens of those communities provided written statements explaining why they need support.

In Pratt, projected energy costs for February were expected to climb 1,018% — a $4.1 million bill for a town of 6,703.

In Altamont, population 1,100, city leaders would have to eliminate all cash reserves to pay its $1 million obligation for February gas use. By taking out a 10-year loan, the city could add $10 to monthly bills instead of making every customer pay an additional $4,000 this month.

In Winfield, the typical residential customer’s gas bill for February is $133. This year, the bill will be $1,731. For businesses, the typical monthly bill will spike from $248 to more than $4,000.

In Lyons, where 16.9% of the 3,700 residents live at or below poverty level, the city’s average gas bill for February is $75,000. The bill for just the six days of extreme cold is $3.3 million.

In Burlingame, a town with fewer than 1,000 homes and businesses, the bill for February is $970,000.

Amanda Stanley, representing the League of Kansas Municipalities, said more than 100 communities in Kansas are worried about “their very survival.”

“In my time working in local government, I have never heard of such desperation from people begging for a solution from someone, and you can give them that today,” Stanley said.

Rep. Blaine Finch, R-Ottawa, testifies Wednesday in support of a loan program to help cities handle high utility costs from February’s extreme cold. (Sherman Smith/Kansas Reflector)

The goal of the legislation, crafted by House Speaker Pro Tem Blaine Finch, a Republican from Ottawa, is to spread the financial burden out over months or years. State law dating to the Great Depression makes it difficult for cities to take on debt, leaving them will few options for handling this crisis aside from passing along high rate costs or property tax increases.

Finch said municipalities faced an “incredible conundrum” last month. Their choice was to turn off the heat during one of the coldest snaps the state has ever seen, or “pay the king’s ransom.”

“They did what any of us would do,” Finch said. “They took care of the people that they serve and they kept the lights on. They kept the heat going.”

He said the Kansas Attorney General’s Office and federal regulators were investigating possible price gouging by natural gas producers.

On the House floor, Rep. Henry Helgerson, D-Wichita, said he was in favor of the bill, but shared concerns about financial ramifications of a city defaulting on a loan. The state could be responsible for repaying the loans, he said.

“It means, a little bit, that there is some risk involved,” he said. “It looks very quickly like this is a program we’re putting in place for perpetuity. Are we expecting this will be going on not only after this emergency?

“While I strongly support this bill, we should look a little bit deeper if there are any other ramifications.”

Finch said the Legislature would likely need to follow this bill with a piece of legislation tweaking the loan program. The state treasurer will have rule-making authority to adjust boundaries of the initiative, he said.

“Right now, the exigency of the circumstances demand that we take swift action to help these cities,” Finch said. “Our priority is to make sure Kansans, no matter where they live, are not hit with unfair utility bills. This is going to help mitigate that trickle-down effect on our families and our businesses.”