Customers of Kansas’ largest natural gas utility could pay cold snap costs for 10 years

Bills could increase by anywhere from $5 to $11 per month depending on which of KGS’ proposed plans is approved.

By: - July 30, 2021 5:47 pm

Andrew French, chairman of the Kansas Corporation Commission, warns in February that natural gas is being sold at far above normal rates. The Kansas Gas Service filed a plan to recover the exorbitant costs from ratepayers over five, seven or 10 years.(Noah Taborda/Kansas Reflector)

Customers of Kansas’ largest natural gas utility could be paying off costs from February’s deep freeze for the next 10 years, the company revealed Friday.

The Kansas Gas Service, which serves more than 640,000 Kansas customers, filed plans with regulators to issue securitized bonds for approximately $390 million in extraordinary costs from the cold snap — plus carrying costs — and recoup the sum from customers over five, seven or 10 years, increasing residential bills by anywhere from about $5 to $11 per month. If the Kansas Corporation Commission doesn’t approve the arrangement, KGS said it would request to recover the costs over three years “to minimize the carrying costs” of the debt.

Its plans come after Black Hills Energy announced in June that its customers bills would increase by an average of $12.23 per month for five years to recover what amounted to a year’s worth of gas charges in one month.

“Compared to traditional regulatory methods over the same period, the company estimates that securitization will save customers from approximately $112 million to $188 million, depending on the recovery time frame approved by the KCC,” KGS spokeswoman Dawn Tripp said in a statement.

February’s deep freeze posed a huge disruption to both gas and electric utilities. In Kansas City, temperatures plunged below 15 degrees for 10 days. At the same time, natural gas prices shot up to record levels. KGS’ filing says, depending on the pipeline, average prices for the company to secure gas in February rose by as much as 10 or 20 times the average over the last five years. A small Kansas town suing BP Energy said in its lawsuit the company inflated gas prices from $2.98 per mmbtu on Feb. 9 to $329.615 from Feb. 13 to Feb. 16.

Now utilities are grappling with how to recover the huge sums they paid for natural gas in February to keep Kansans’ heat and lights on.

Customers may have already paid high bills for extraordinary usage to keep their homes warm. But natural gas rates are set in advance through the regulatory process, and those high prices weren’t immediately passed on. 

The high price of natural gas and lack of supply has been identified as one of the primary reasons electrical utilities were instructed to institute rolling blackouts to avoid the uncontrolled outages affecting millions in Texas. The Southwest Power Pool, a regional transmission organization that coordinates electrical power in Kansas, earlier this week released findings saying that natural gas was hard to come by during the deep freeze.

During the storm, the KCC instructed natural gas utilities to keep service on and defer any extraordinary costs to be repaid later. It then opened dockets to investigate each utility and asked them to present a plan to minimize the crush to customers rather than requiring them to pay the exorbitant gas prices immediately.

Evergy, too, will seek to recover costs from customers. In the Kansas City area, the utility was able to generate more power than it needed and sell the excess to the Southwest Power Pool. But customers outside the metro in Kansas could gradually repay $152.3 million over two years. In parts of Missouri, the company is asking to defer costs from the storm and recover more than $297 million potentially over 15 years.

The figures in KGS’s plan are subject to change, the filing says. The company is disputing $15 million in gas charges from one supplier. Any federal or state relief or findings that the natural gas market was manipulated will be credited to offset the charges to customers, the company said.

David Nickel, executive director of the Citizens’ Utility Ratepayer Board, which advocates for residential customers, said the organization was still looking at the plan, which was filed Friday afternoon. But he said securitization shows promise.

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Allison Kite
Allison Kite

Allison Kite is a data reporter for The Missouri Independent and Kansas Reflector, with a focus on the environment and agriculture. A graduate of the University of Kansas, she’s covered state government in both Topeka and Jefferson City, and most recently was City Hall reporter for The Kansas City Star.