Climate and energy

Energy issues in Kansas are actually much broader than the narrowly focused debate over Sunflower Electric’s proposed coal plants in Holcomb. One example is the largely untold – and more positive – story of the KCPL energy efficiency bill (as it seems to be known around the Capitol). Basically, the bill is about about using energy more wisely, instead of building additional new generation facilities.

This legislation stands a good chance of making it into law this session. However, it’s been a long strange trip – and it ain’t over yet. The bill started out as HB 2632, but at last tally, some version of its language appeared in at least four other different bills (or “vehicles”):

SB 586 – HB 2632 language was added to nuclear power bill allowing utilities to recover “prudent costs” of developing nuclear power. (See bill, supplemental note, and fiscal note). Passed by House and Senate and will go to conference committee. After committee, returns to House and Senate floors for votes to concur or non-concur – no amendments can be added at that time.

SB 580 – Language was added to weatherization bill. Passed by House and Senate and will go to conference committee. After committee, returns to House and Senate floors for votes to concur or non-concur – no amendments can be added at that time.

HB 2632 – Original bill, now has an air permit amendment (see below). (See amended bill, plus supplemental note and fiscal note.) At this moment, doubtful this version will go any further.

SB 327 – Was added to the first Holcomb bill in conference committee, as attempt to green the initiative. Vetoed by the Governor, now awaiting override vote to start in Senate and move to House.

SB 148 – Was included in the second Holcomb bill as part of the original SB 327 (new provisions were added to second Holcomb bill, nothing was taken out). Was sent to blessed committee on Thursday to avoid dropping dead in face of procedural deadlines. Will probably be back in General Orders for the House to consider on Monday.

Pretty wild list – but hey, that’s democracy. More of the twists and turns will emerge as the story unfolds below, but generally:

Why does energy efficiency matter? What’s in the KCPL language – how does it help achieve these goals, and what are some other suggested options? How did one bill get so complicated (although that’s actually not so unusual), and how did it get tangled up in the Holcomb issue along the way?

To find out the answers, read on.

What energy efficiency is, and why it matters

Energy efficiency means using energy more wisely – everything from using compact flourescent lightbulbs (CFLs) to installing programmable thermostats, more insulation, better windows, etc. The less energy their customers use, the fewer new power plants that utilities have to build. (If you want some free and easy energy tips for yourself, check out CEP’s Take Steps page.)

According to American Council for an Energy Efficient Economy (ACEEE), energy efficiency currently costs 3 cents per kilowatt hour, while new generation costs 9 cents per kilowatt hour. In today’s world of skyrocketing fuel and operations costs for energy, energy efficiency simply makes sense economically, as well as environmentally.

CEP has heard that Duane Schrag of the Salina Journal is working on an in-depth article on the issue of energy efficiency. CEP will link to it as soon as it comes out.

How KCPL got involved in the issue

As many of you know, a while back KCPL entered into a deal with the Sierra Club in order to build a new coal-fired power plant. KCPL agreed to many green provisions. One was the requirement to add an additional 100 megawatts (MW) annual demand of energy efficiency by 2010, hitting a total of 200 MW annual demand of energy efficiency by 2012.

To meet the terms of this deal, KCPL has already developed several energy efficiency programs. The Kansas Corporation Commission (KCC) has allowed them to seek cost recovery on a case by case basis.

A moment to explain how electrical rates work: Investor-owned utilities like KCPL have traditionally made profits for their investors by selling more and more power to their customers.

As the world around us changes, though – we need to use less power, not more, for many economic and environmental reasons – this rate structure is clearly outdated. Utilities need to be able to make profit for their investors by lowering load growth, not raising it.

Thus, KCPL is essentially seeking a new way to do business. In this case, they want to recover the costs of energy efficiency programs so they can better serve customers, without raising the ire of their shareholders.

KCPL is pursuing this goal two ways: (1) through the legislative process, and (2) through the administrative agency process, in the form of an energy efficiency docket currently under way at Kansas Corporation Commission (KCC) (go to this page and search for 08-GIMX-442-GIV and 08-GIMX-442-GIV).

Where the bill(s) come(s) from, and the basic language

The basic language of the KCPL bill would require the KCC to allow utilities to capitalize their expenditures for energy efficiency, conservation, and demand management into their rate base.

The reasoning behind doing it this way: the theory is that energy efficiency takes the place of building new generation. Since new generation costs are capitalized – meaning, they extend over time and in effect gain interest – then energy efficiency costs should be as well.

The KCPL language has pretty much sailed through. Supporters included Westar, Sierra Club, CEP, and Olathe School district, among others.

However, during the process a few issues have also been raised. (CEP took notes during the first and second day of testimony on HB 2362 before the Senate Committee on Energy and Utilities if you’d like to glance over them.)

Some questioned whether capitalization, versus regular cost recovery, was the right method of covering the expenses of energy efficiency. AARP and the Citizens Utility Ratepayer Board also objected to any raise in rates as hurtful for low-income and fixed income populations.

There was also a suggestion that a statewide third party provider funded by a surcharge on utility bills – like Efficiency Vermont – might be another way to implement energy efficiency programs, rather than utility by utility. For third party provider to become a realistic policy option in Kansas, though, that would take at a minimum a strong commitment to energy efficiency by a majority on both the House and Senate Energy and Utilities Committees, a majority of the utilities and cooperatives in the state, support from the KCC and other state energy interests, as well as a strong ratepayer/ constituent advocacy.

Unfortunately, with the Holcomb issue dominating and fracturing the entire energy discussion this legislative session, forming such a coalition on energy efficiency was not really even on the radar.

So how did one bill get so complicated?

During the legislative process, the same language can get moved around into numerous related bills, or vehicles. Sometimes the bill’s sponsor moves the language around on purpose, to give it a better chance of making it through. Sometimes someone else unexpectedly dumps it in another bill. Amendments can occur that the bill’s original drafters would really rather not see happen. Etc.

Pretty much all of the above happened to the KCPL language. Some of it was related to the Holcomb drama. Primarily this happened in two ways. First, especially by Kansas standards, the KCPL bill was green. The Holcomb bill, for example, was in need of greener provisions. Like chocolate and peanut butter, the conference committee on SB 327 (the first Holcomb bill) thought those two made a good combination.

Second – and this gets interesting – during the Holcomb controversy, the investor-owned utilities in Kansas – Westar and KCPL – did not come out in support of Sunflower Electric and the proposed coal plants. Instead, at the hearings they testified as neutral (Westar testimony is here, and KCPL’s is here).

This was not uncontroversial. When the original HB 2632 came to the Senate Committee on Energy and Utilities, Senator Janis Lee, a strong supporter of the Holcomb plants, questioned KCPL executive Mike Deggendorf on exactly this point (refer to the Day 1 link above).

She pointed out that while he wanted regulatory certainty for his company in terms of the KCC – a guarantee that KCPL could depend on some stable form of rate recovery for energy efficiency – he did not have the same concern for regulatory certainty regarding the KDHE. Evidently, this was a reference to the fact that KCPL had not come out in support of Sunflower.

Later, when the bill was worked (at a Senate Committee meeting that CEP did not attend and does not have notes for), Senator Lee added some new language. This stated that any utility wishing to renew its air quality permit through the KDHE would have to meet the same standards that the KDHE secretary used in considering the Holcomb air quality application -

- which, of course, the KDHE Secretary denied for the proposed Holcomb coal plants, on the basis of concerns over greenhouse gas emissions. KDHE Secretary Bremby has since testified on this decision before Congress.

If the original HB 2632 now made it through the legislative process, what would happen if KCPL had to re-apply for a permit for one of its existing coal-fired units? Don’t know. If that permit was denied, would KCPL have to cease operating that plant and thus possibly be forced to shut off customers? Don’t know.

Probably won’t happen. And the original KCPL language is alive in the process in several different versions, without this risky language.

Still, this part of the story is fairly sobering. On many levels.

Altogether, a long strange trip for an energy efficiency bill – one that, in the very near term, could conceivably set the foundation for many, many Kansans to use energy more efficiently, and for their utilities to help them do it. And the trip’s not over yet.

We’ll try and keep an eye on it.

— Maril Hazlett, www.climateandenergy.org