Publications & Presentations
May 17, 2021

Dynamics of both plans

After years of failing to gain traction in Kansas and Missouri, securitization legislation finally broke through during the 2021 legislative session in both states. The bills could impact and accelerate the move toward carbon free electric power resources. Passage in both states was made possible by support from the major investor owned utilities.

In Missouri, at the final hours of the legislative session, a securitization bill passed with near unanimous bipartisan support.

  • The bill permits utilities to petition the Missouri Public Service Commission “PSC” for a financing order authorizing the utility to issue “securitized utility tariff bonds” to finance the retirement of generation plant before the end of its useful life.
  • For so long as the securitized bonds are outstanding, they are “non-bypassable” and must be paid by all existing and future retail customers of the utility. This guaranteed recovery mechanism makes the rate of return on the bonds lower than the utilities’ existing cost of capital, which unlocks savings for the utility and its ratepayers.
  • The utilities have discretion as to whether they will apply for a financing order permitting securitization and which generating units it will apply to. The PSC will have discretion regarding the conditions placed on any such order. Accordingly, the extent to which the securitization tool will be used and the details of how it will be implemented are still unknown.
  • The bill also includes a mechanism for financing orders addressing “qualified extraordinary costs” tied to anomalous weather events such as the February 2021 extreme whether event.
  • Finally, the bill includes an unrelated provision that bars local governments from prohibiting any particular type of energy from being connected to a customer’s residence (i.e. barring local ordinances that restrict new natural gas hookups).

In Kansas, the securitization legislation was languishing with little hope of passage until the February extreme weather event occurred and the securitization bill became a mechanism for utilities to also seek relief from high gas cost spikes in addition to early retirements of aging carbon-intensive electric generation resources.

  • The securitization bill in Kansas was passed in both chambers of the legislature with large bipartisan majorities, and was signed by Governor Kelly on April 10, 2021
  • The mechanics of securitization in Kansas would operate essentially the same as securitization in Missouri.
  • Like Missouri, Kansas utilities also have discretion on whether they will apply for a financing order permitting securitization, and which generating units it will apply to. The Kansas Corporation Commission “KCC” will have discretion to place conditions on any such order. Accordingly, the details will be worked out in future proceedings before the KCC.
  • The bill also includes a mechanism for financing orders addressing “qualified extraordinary costs” tied to anomalous weather events such as the February 2021 extreme whether event.
  • The Kansas legislature separately passed a bill barring municipalities from passing ordinances that would limit types of utility connections for end use customers.

Now the work begins, seeing how these securitization bills impact Integrated Resource Plans “IRP’s” of the various utilities and whether environmental advocacy groups and consumer groups will impact utility’s generation assets.