Kansas regulators parse apart Evergy's Sustainability Transformation Plan

Titus Wu
Topeka Capital-Journal
Evergy is pushing for its Sustainability Transformation Plan, which is currently being vetted by the Kansas Corporation Commission.

Regulators at the Kansas Corporation Commission have been digging into in recent months the so-called "Sustainability Transformation Plan" put forth by Evergy, the state's largest utility. 

Evergy announced its plan in August of last year, after pressure from an investor to boost its stock price by a "a full revamp of Evergy's long-term capital plan and operating strategy" or to merge. The STP is a result of that first option.

Per the company, the plan would modernize the utility’s energy grid, further invest in renewable energy sources and reduce operational costs. Evergy expects to put in $5.6 billion in capital expenditures in Kansas over five years to upgrade transmission and distribution infrastructure, among other things.

The KCC stepped in shortly after the plan was announced. Intervenors, such as the Climate and Energy Project and the National Resources Defense Council, also stepped in, concerned that energy bills may be raised or eco-friendly goals were not enough.

In three hours-long sessions in December and January, the commission and energy advocates grilled Evergy as the company presented its STP.

What STP does

Grid modernization is desperately needed, said Bruce Akin, Evergy's vice president for transmission and distribution, because of aging infrastructure.

"Our transmission grid was built around existing power plants and load," he said. "A modern grid will enable decarbonization by improving renewable delivery and strengthening the grid of the future as we retire fossil units."

Much of that will include implementing technology onto the grid once the underlying infrastructure is replaced. Such tech would be able to efficiently manage power flows, minimize disruptions and optimize voltage, which in turn would lower fuel costs for the customer.

A lot of this is brought about from the societal shift toward renewable resources, said Ryan Mulvany, Evergy's senior director of operation analytics. Originally, energy flow was one-way from a substation to individual customers.

"Transformers are now beginning to flow bidirectionally based on perhaps customer-owned solar, or customer-owned wind generation," he said. "This bidirectional flow creates stress on the grid. A robust and resilient grid is necessary in order for Evergy to prepare our grid for those types of technologies as we roll through our planning horizon."

The goal is to lower overall net fuel and operating costs by 25%, which would make rates more competitive with other states. From 2019 through 2024, Evergy expects cost improvements through the STP of over $300 million a year.

The Kansas Corporation Commission has opened an investigation into an agreement between utility company Evergy Inc. and investor Elliott International.

Rates and costs

All this overhaul, however, would be costly. The question was whether those costs would be passed to the customer in the form of increased rates. Evergy's representatives said they would keep any rate increases at the pace of inflation of lower.

You all "have talked with such casualness about staying within the cost of inflation, as we look at the cost of this STP of around 2%," criticized Commissioner Susan Duffy. "You're right. Inflation is still staying very low. But I would remind you that there are folks who are still making $10 an hour below the cost of inflation; they've never received a pay increase."

Darrin Ives, Evergy's vice president of regulatory affairs, said that wasn't the intention. The goal, he said, is that the costs would mostly pay for themselves in the form of savings and reduced operating costs.

 But Commissioner Andrew French was confused.

"If the cost of serving customers is going to reduce by $300 million a year, why aren't customers receiving a rate decrease ... as a result of, of the cost savings of $300 million per year?" he asked.

Greg Greenwood, Evergy's chief administrative officer, gave more of a non-answer, saying that there's a variety of attributes needed to be taken into account for modest increases in rates.

KCC questioned what concrete measurements there would be to show such benefits and whether grid modernization had finally been achieved. Evergy leaders didn't provide much beside saying they would look at reliability indices as a factor and have more as the plan is executed.

"Some parts of the system are in more need of these technologies than others. Some parts of our system are quite new, and don't experience the reliability issues that other parts of our system do that need this technology," said Mulvany, the senior director of operation analytics. "We'd much prefer to be much more paced and thoughtful in our approach as to when we roll that technology out."

Energy storage assets in front of a wind farm.

Going for green

On the renewable energy front, Evergy is looking at it eventually supplying about a third of the utility's electricity after the STP. Currently, renewable energy makes up 28%, making it a 5- to 6-percent difference that environmental advocates said was not enough.

"Why are everybody's expectations for coal production and renewable increase only 6% through this sustainable transformation plan?" asked Ty Gorman, of the Kansas Sierra Club. "No grid (modernization) investments are really needed to achieve that level of renewable increase."

Kayla Messamore, Evergy's director of long-term planning, said logistics was the reason more of a switch can't be achieved, considering the timeframe needed to retire coal plants and replace them with large solar or wind farms. 

Additionally, there are energy capacity trade-off issues.

"All of those numbers to say that you have to put in twice as much solar to replace the coal megawatt all else being equal, which can create some significant capital costs as you're trading off of fairly depreciated coal," said Messamore, who pointed to solar "where you need twice as many megawatts."

Evergy said, however, that by 2030, they could maybe have 80% of generation capacity coming from carbon-free energy (has a different definition than "renewable energy"), up from around 50% as it is now.

Evergy also hopes to reduce costs and make more investments on improving customer experience-related interfaces, though this component is further down the line.

As for the next steps, the utility is set to discuss and collect more feedback from intervenors regarding its STP. The goal is that with all the input from the KCC and others, Every will have an improved or modified plan by May.