Mark Horst, owner of King Solar in Yoder, says Kansas should end the utility monopoly on power purchase agreements with businesses, churches, schools and others who want electricity from solar systems on their property but lack investment capital to build. He says opening the market would allow developers to construct facilities and deliver power at rates below that available on the grid. (Sherman Smith/Kansas Reflector)
TOPEKA — Four utility companies serving Kansas want to cast aside legislation enabling businesses, schools, churches, hospitals and others to enter contracts with investors for installation of solar arrays on their property and to directly purchase that electricity at a lower rate than available on the grid.
Evergy, Kansas Electric Cooperatives, Wheatland Electric and Heartland Rural Electric Cooperative joined staff of the Kansas Corporation Commission with objections to a House bill ending the monopoly held by Kansas utility companies on that type of power purchase agreements.
“This bill, by another name, is a mini-deregulation bill for large customers,” said Jeff Martin, Evergy vice president of customer operations. “Evergy strongly opposes this bill because it will hurt residential and smaller commercial customers. Proponents of this legislation are not suggesting that they no longer want access to the electrical grid or the generation that Evergy provides them today. They just want to pay less.”
Twenty-seven states, including Oklahoma, allow third-party production contracts for electricity from solar or wind systems. Kansas remains among seven states to expressly forbid the practice. Kansas is one of the top 10 sunniest states, but in 2020 ranked 43rd in terms of solar generation.
Jessica Lucas, representing the Clean Energy Business Council, said opposition to House Bill 2227 was misguided. There’s no justification for a state law making power purchase contracts the exclusive domain of utility companies, she said. Consumers of electricity ought to be free to make choices about financing, construction and operation of solar or wind facilities on their property without involving a utility company, she said.
“That’s why this legislation is being sought,” Lucas said on the Kansas Reflector podcast. “It does provide, again, more choice to customers making decisions about their energy consumption. We want Kansans to have as many tools in their toolbox to use for deciding their energy generation.”
She said the legislation shouldn’t be viewed through a partisan lens because accessing advanced technology for rooftop solar, for example, wasn’t about political objectives of Democrats and Republicans. The question was whether the best interest of Kansans argued for transition to a law permitting third-party contracts for independent generation of electricity, she said.
Advocates of the bill included the Kansas Chamber, the U.S. Army’s regional environmental and energy office at Fort Leavenworth and an assortment of companies involved in solar development, including Cromwell Environmental of Lawrence, King Solar of Yoder and Stanion Wholesale Electric based in Pratt.
Eric Stafford, a lobbyist with the Kansas Chamber, said the business organization’s legislative agenda included the goal of creating equal competition among energy sources and technology. He recently told the House Energy, Utilities and Telecommunications Committee that Kansas’ competitive position nationally for lowest average energy cost had slipped from the 14th to 34th.
“Our ratepayer members continue to express concern over rising energy costs,” he said. “State law should encourage competition and not prevent it from the marketplace.”
Solar energy contractor Mark Horst, who owns King Solar, said the House bill would offer businesses, organizations and individuals greater opportunities to enter agreements for self-production of energy that avoided responsibility for the large upfront capital investments. Under existing law, he said, a church interested in a solar array for the roof needed to come up with hundreds of thousands of dollars.
“A power purchase agreement allows a financer to buy the system, own it and have it installed. Then the church just buys the power that that produces every month, perhaps at a lower cost,” Horst said.
Under the bill, allowable purchase agreements for residential customers would be capped at 25 kilowatts, deals for commercial customers could be no larger than 200 kilowatts and the schools, hospitals and religious structures would be capped at 1.5 megawatts. There would be no limit for military installations.
Patrick Orr, regulatory analyst for the Citizens’ utility Ratepayer Board, said CURB’s advocacy for residential and small commercial ratepayers led it to conclude the House bill could be a useful financing mechanism for retail electric customers drawn to solar or wind energy for their own use. The bill would be in the public interest because it would help broaden the state’s energy portfolio, he said.
Not so fast
Jeff McClanahan, director of utilities at the Kansas Corporation Commission, said the commission staff recommended the Legislature decline to pass the House bill because greater use of purchase power agreements, or PPAs, by commercial and industrial customers would undercut utility electricity sales and leave customers not served by a PPA to pay whatever was necessary to hold utility revenues constant.
He said the bill wouldn’t relieve utilities of the obligation to serve all customers. Utilities would need to maintain sufficient generation capacity to meet demand despite spread of customer-generator contracts, he said.
Coverage of a utility company’s fixed costs could be resolved by imposing an additional demand charge or adopting a minimum bill on all customers, McClanahan said.
“Staff would note that high fixed charges and minimum bills are not popular with customers because they heavily diminish a customer’s control over his or her total bill,” he said.
Bruce Mueller, general manager of Wheatland Electric Cooperative serving 23,000 customers in 15 Kansas and two Colorado counties, said the House bill would shift electricity costs away from members able to afford behind-the-meter generation to members who couldn’t.
School districts and other large consumers of electricity would want to remain a Wheatland member even if connected to solar or wind generation, he said.
“They know that the sun does not always shine and the wind does not always blow,” Mueller said. “Wheatland will have the ongoing debt for assets and maintenance costs. All of those costs in investment, administration, operations and maintenance that are now stranded would be socialized in Wheatland’s rate design process and passed on to the other members of Wheatland.”
What about net metering?
Michelle Milburn, clean energy product manager for Stanion Wholesale Electric, said the Legislature should also consider setting net metering standards on all utilities, cooperatives and municipal electricity providers. Net metering is the process of allowing people with renewable energy generation to funnel surplus electricity to a utility power grid to offset a portion of their electricity costs.
“We’d like to see it more consistent,” she said on the Kansas Reflector podcast. “Someone like myself, who helps folks assess whether or not they have a viable option with solar, we take into account their production, we take into account their resource, but we also have to take into account these policies that vary, and it can really degrade the viability of a project.”
Under House Bill 2228, state law would add Kansas electric utilities not under KCC jurisdiction to the list required to participate in net metering. KCC-regulated utilities have been involved in net metering for years.
The bill would increase the total generating capacity limit for net metered systems from 1% to 10% of a utility’s peak demand from the previous year. Some Kansas utilities are near the current cap of 1% peak demand. Once reached, a utility may no longer be required to make net metering available to customers generating electricity on their own in Kansas.
This bill would modify how excess energy would be counted for purpose of offsetting a customer’s utility bill. Existing law says excess energy must be credited to the customer at the same rate as the utility’s monthly average kilowatt-per-hour cost. The bill says a customer’s excess energy would be carried forward as kilowatt hours against future energy consumption. Supporters of the bill also want to eliminate the expiration date of net metering mandates in state law beyond 2030.
Justin Cobb, of the nonprofit Nature Conservancy in Kansas, said net metering in Kansas was hampered by lack of uniformity and business uncertainty.
“With recent studies and hearings identifying that Kansas has higher utility rates than the surrounding region,” Cobb said, “one simple solution is to relax regulations on net metering capacities to match surrounding states.”
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