Opinion

Want to avoid a repeat of February’s billion-dollar energy crisis? Transparency is the first step.

November 14, 2021 3:33 am

A request for documents from Kansas Gas Service by Kansas Reflector columnist Max McCoy led to a largely redacted response. (Illustration by Clay Wirestone/Kansas Reflector)

Back in September I filed an open records request with the Kansas Corporation Commission for contracts and invoices related to the February 2021 cold wave, which drove wholesale natural gas prices through the stratosphere.

It was the kind of request that journalists routinely make in the public interest. We seek information from governmental entities to aid in answering questions, big and small, for our audiences. In this case, the question was a big one, because the price tag for the market-driven energy crisis which walloped us around Valentine’s Day was $1 billion. Kansas consumers are on the hook because utilities are allowed to pass on those costs to their customers, and millions of dollars in new rates have already been approved.

The KCC regulates the state’s utility companies and is subject to the Kansas Open Records Act. KORA is the law that requires public agencies to provide access to records that aren’t otherwise exempted. An example of the kind of records that the public can’t view through KORA are the grades you made as a high school student. Your medical records are also off limits. This is reasonable stuff. The law allows for other information to be shielded, including legitimate trade secrets and documents related to an active police investigation.

The Kansas Press Association has a nifty pocket guide to open records and open meetings. But these laws aren’t just for journalists, they’re for everyone. They empower citizens to seek fact, the lifeblood of democracy. The law has been weakened over the years by an onslaught of statutory exemptions, making Kansas one of the most secretive of states, but KORA is still one of the most powerful tools in our transparency toolbox.

An agency has, by law, three business days to respond. The request must be filled or the agency must explain why it needs more time, or if it feels the information sought is exempt. In my career as a journalist, I’ve filed a couple of hundred open records requests, and they usually take a predictable path. Many are satisfactorily filled, after some negotiation about what a reasonable and actual cost for the documents would be. Sometimes a little education is involved, because many records custodians aren’t all that familiar with KORA, and some wrongly try to hide documents in their possession from public view.

My request with the KCC took a different path.

The KCC has a set of administrative rules that determine how KORA requests are handled, which typically means requests are placed on the three-member commission’s docket for hearing. It also allows third parties to the requests — in this case, the utility companies — to weigh in. Because KCC operates like a court, there are phalanxes of lawyers at hand, and I was blanketed with objections from Kansas Gas Service and Black Hills Energy about why these contracts and invoices were trade secrets and otherwise protected from disclosure. KCC staff, those who serve the commission, are also allowed to make recommendations. Staff and other parties to rate cases, such as attorneys with an interest in the rate cases, have access to the contracts and invoices, but they are required by the KCC to sign nondisclosure agreements, which in other circumstances would be called a gag order.

Max Kautsch, the Kansas Press Association’s legal hotline attorney, told me recently he had concerns about the way in which the KCC has adopted administrative regulations that remove it from KORA oversight.

“It is the definition of government fiat for the KCC to effectively exempt itself from disclosure of public records that are in the public interest,” Kautsch said.

While there are statutes for trade secrets and utilities that do limit the reach of KORA, Kautsch said, the KCC’s administrative regulations appear to go beyond what is reasonable.

“A regulation like this, that’s written by the agency that is the custodian of the records, is designed to make it easier for the agency,” he said. “There is no oversight, and no way to challenge or appeal it. You can’t fix this problem retroactively. This procedure creates a hurdle that is just really not conducive to the free flow of public information.”

Kautsch also expressed doubt about whether there is a valid justification for the KCC to withhold natural gas invoices from the public. While contracts may be deemed confidential, according to state law, the invoices are not.

Kansas Gas Service has maintained — in response to inquiries and in filings with the KCC — that the contracts, invoices, and other data constitute confidential information which, if made public, would inhibit its ability to secure supplies of natural gas in an unregulated and highly competitive market.

Last summer, the National Gas Transportation Customer Coalition asked the KCC to make public the contracts and invoices. The KCC refused, citing staff recommendations. But in September, the NGTCC’s attorney, Jim Zakoura, a consumer advocate, pointed out to the commission KGS had already made some of the information public, in an apparently accidental unredacted filing. The filing included a list of out-of-state firms that had billed the utility hundreds of millions of dollars to supply gas during the winter storm.

Zakoura asked the KCC to reconsider making the supplier information public, and on Oct. 14 the commission ordered Kansas Gas Service to file “public versions of all of its supplier contracts and invoices” related to the weather event. The utility did so, but redacted just about all information except the names of the suppliers and the total amounts paid, which had already been made public.

Zakoura declined comment for this column.

On Nov. 8, at the direction of the KCC, the gas company provided an amendment to the “public versions” filing. I was provided a copy of the amendment, in response to my original KORA request. Essentially, the document is an argument to the commission about why it feels it shouldn’t have to make any additional information available about its purchases of gas during the storm. To make such information public, KGS claims, would place it at an unfair advantage with other utilities that aren’t required to disclose this information.

“Kansas Gas Service met with Staff to discuss the redactions and to explain why each category of redacted information should be considered a trade secret,” the document said, and listed 11 categories. These included the amount of natural gas purchased under each transaction, the index price used, the actual price paid, the pipelines used for delivery, the location of each sale, the start and stop date of each transaction, the description of each transaction, any special contract terms, the contact persons for the sellers, invoice numbers, and banking information.

The KCC has not yet responded to the amended filing.

But I’m not optimistic.

Surely there are few requests that are as clearly in the public interest as the invoices of wholesale gas suppliers who profited, in the hundreds of millions of dollars, during a weeklong energy crisis for which Kansas consumers will be paying for years. The presumption by the commission appears not to be one of openness, as required by law, but of secrecy.

Transparency requires that the public, and not just the parties to filings, have access to this information. There are certainly instances where disclosure of sensitive data might jeopardize the public interest. No rational and civic-minded person would want details of the security measures for the Wolf Creek nuclear power plant to be open for inspection. But it’s difficult to see how making public invoices for rates charged during an energy disaster nine months in the past would result in harm to anyone involved, other than perhaps inducing a little shame.

A week of unexpected cold tipped us over into an energy crisis that drove the wholesale price of natural gas skyrocketing. It increased by 24,419% in a few days. If this is not a clear sign that something is broken with the wholesale natural gas market, it is hard to imagine what would be.

Utility regulation should be about three things: Safety, supply, and affordability. The KCC does a great job with the first two. Kansas consumers are, after all, captive to state-regulated monopolies to provide heat and light. But when it comes to item three, affordability, the commission is faced with deciding what is fair and affordable when it comes to rate plans that pass wholesale costs on to consumers. This is where the commission fails, and the problem is compounded by a lack of public transparency.

To contrast, let me tell you about a similar request I filed the same week in September with the Kansas Municipal Gas Agency. The KMGA was created in 1990 by a group of 27 cities, under the Kansas Interlocal Cooperative Act, as a marketing pool to purchase natural gas. There was the usual back and forth with the records custodian at the KMGA over my request, which included clarification on scope and costs, but eventually I received a digital file with the requested contracts and invoices. The cost to the Kansas Reflector was about the price of a dinner out.

Ten suppliers invoiced KMGA about $40 million for the gas during the storm. Here’s the list: BP Energy, $14.86 million; Maquarie, $12 million; CIMA, $3.7 million. Southwest, $3.5 million; Symmetry, $3.3 million; Bluemark, $2.17 million; NextEra, $303,182; Conoco Phillips, $60,117; Koch, $19,572; and Tenaska, $3,350.

Kansas Municipal Gas Agency winter storm 2021 documents

 

KMGA has provided transaction detail as well. You can see, for example, that on Feb. 16 Bluemark delivered 800 units of natural gas, at a Southern Star market zone spot price of $329.735 per unit. There is similar detail for other suppliers, and more information than I can recount here.

During the storm, wholesale natural gas prices peaked Feb. 17, at $623 per unit. That’s up from about $2.50 just a few days earlier. Because wholesale gas is an unregulated market, the severe demand created across several states by the unexpected cold wave created a market cycle of madness.

My fear is that there is no circuit breaker in place for the wholesale gas market, and that this pattern will be repeated. Rates have already doubled, and Kansans are being warned to expect their gas bills to jump by $100 per month. The shortage economy is bad enough when you’re talking about Christmas toys, but consider what scarcity of affordable heat would do to our most vulnerable families.

It’s time for the Kansas Corporation Commission to reconsider the way it does business. While I believe there are people with the best of intentions at the commission, on its staff, and at the state’s utilities, I also know there are predators out there who will not flinch at exploiting misery for profit. Few want to pay more for their utilities, but some Kansans — the elderly on fixed incomes, single parents working multiple jobs in a gig economy and those who have resigned from an economy that just doesn’t make sense anymore — will be faced with the choice to buy food or keep warm.

Somebody told me something a few weeks back that has stuck with me. I can’t share who, because it would compromise their position as an insider in the regulatory business. But he said he often thinks the answer to utility regulation is to ask all the lawyers to leave the room so that people of good conscience can do that right thing.

That might be the place for the KCC to start.

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Max McCoy
Max McCoy

Max McCoy is an award-winning author and journalist. A native Kansan, he started his career at the Pittsburg Morning Sun and was soon writing for national magazines. His investigative stories on unsolved murders, serial killers and hate groups earned him first-place awards from the Associated Press Managing Editors and other organizations. McCoy has also written more than 20 books, the most recent of which is "Elevations: A Personal Exploration of the Arkansas River," named a Kansas Notable Book by the state library. "Elevations" also won the National Outdoor Book Award, in the history/biography category. Max teaches journalism at Emporia State University.

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