Kansas lawmakers rush to help cities slammed by sky-high energy bills
State legislators are moving with breakneck speed to provide assurances to ratepayers and municipalities who are staring down the barrel of sky-high energy bills after bitter cold temperatures rammed the state and region last month.
A new program to provide loans to municipalities, which will have to pay bills in the hundreds of thousands of dollars within the next week, was fast-tracked with an aim to having the money in the hands of cities as soon as possible.
It was signed into law by Gov. Laura Kelly Thursday night, just 12 hours after it first passed a House committee.
"It gives them the immediate relief they need to avoid dire financial decisions while we pursue other, long-term solutions," Kelly told reporters.
It comes as federal and state authorities are investigating how natural gas prices skyrocketed, with production slowing during the bitter cold snap in February, making gas scarce.
The Kansas Corporation Commission is ordering a review of how the state's largest utilities are going to grapple with the costs, which a report issued this week said could total in the billions. Federal regulators and Attorney General Derek Schmidt are launching separate price gouging probes into the natural gas market.
Municipalities like Denison say they cannot afford to wait for the results of an investigation, however. The tiny town of 169 residents in Jackson County is stuck with a gas bill of $241,400, which is double the $125,000 it paid for gas in all of 2020.
This is a story that repeated itself in municipalities across Kansas, ranging from Winfield in Cowley County to Argonia in Sumner County.
In Goodland, a town of 4,400 in the state's far northwest corner, the total bill could be as high as $1.5 million, city officials warned legislators in a letter.
Those cities with municipal utilities are now faced with a choice: saddle residents with a massive bill or find other ways to pay the piper, such as property tax hikes.
House Speaker Pro Tempore Blaine Finch, R-Ottawa, said that cities were forced with an impossible dilemma: keep the heat on for residents during dangerously cold weather or pay a "king's ransom" for gas, which cost thousands of times the normal going rate.
"They did what any of us would do — they took care of the people they serve, they kept the lights on and kept the heat going," Finch said. "But these bills threaten to leave these cities with no option, except for bankruptcy."
The solution legislators have devised is to use idle funds in the state treasury to power $100 million in loans to municipalities like Denison. The loans could be paid back over 10 years, meaning costs could be passed along to residents slowly, rather than in one eye-popping bill.
The program would be similar to an effort signed into law last month by the governor to help rural businesses and would offer the loans at a below-market rate.
While many cities were able to cobble together the funds to pay the first round of bills from the cold snap, a second payment is due at the end of this week or early next week.
Kimberly Gencur Svaty, a lobbyist representing municipal utilities, underscored that time is of the essence.
"This is something that you can do right here, right now that will literally make a difference in the lives of people in the next 10 days," she said.
Some members of the Kansas Senate, both Republicans and Democrats, were skeptical of the proposal.
One lawmaker, Sen. Alicia Straub, R-Ellinwood, said in a Republican caucus meeting that municipalities should not pay their bills until federal and state investigations are complete.
Representatives from the utility industry say this would result in power being shut off for affected communities but Straub said she thinks "there is a better solution."
"I don't think my constituents should have to pay this in any way," Straub said on the Senate floor. She was the lone vote in opposition to the proposal.
State Treasurer Lynn Rogers said he was convening with staff Wednesday afternoon to figure out a way forward, assuming the program is signed into law.
Cities would have to submit an application, likely with aid from the League of Kansas Municipalities, and certify that their need was extraordinary.
Rogers said his office was working on setting up a firm timeframe for when loans might start being issued but said it would be within the two-week timeframe required in the bill, if not sooner.
The legislation focuses on municipal-owned utility companies, rather than larger, investor-controlled companies, such as Evergy, Kansas' largest electric utility.
Those firms, even in the electric market, were also affected by the energy crisis. The KCC report released earlier this week noted that Evergy purchased about $300 million more than normal during the cold spell.
The company has maintained that state regulations prevent it from passing those costs along to consumers all at once. But Evergy has warned that consumers may see an uptick in their bills due to the higher energy usage, even if they attempted to conserve power.
"Any change you see in your March bill, up or down, is going to be based on how much energy you used this month," Gina Penzig, a spokeswoman for Evergy, said last week.
Kelly and others say they are working on their own solutions to deal with the problem. And it is likely that federal action and relief could be coming, as well.
In the event that cities get aid from Washington, D.C., potentially as part of a $1.9 trillion stimulus package in the U.S. Senate, they would have to use those dollars to first pay back their state loan.
But there is a broader acknowledgment that larger-scale reforms to the energy markets are needed to ensure that cities and ratepayers aren't put in a similar position again.
"The ultimate solution to how we strengthen the grid is not something this committee or even this state can handle, that probably is going to be a federal solution if, and when, it comes," Finch said.