Kansas regulators worry investor's influence at Evergy could raise your electric rates
A growing relationship between Evergy and activist investment firm Elliott Management is raising red flags with state and federal regulators.
WICHITA, Kansas — Regulators on the state and federal level see trouble for ratepayers in the growing relationship between the state’s largest electric utility and one of its investors.
The concern stems from how much influence Elliott Management has at Evergy and whether it’s using that clout to spur a massive change in spending that will cost customers money.
Kansas regulators began looking into the relationship more than a year ago after Evergy revealed its $8 billion plan for phasing out fossil fuels and replacing them with wind and solar power.
The plan called for a dramatic increase in spending on things like clean energy generation and upgraded transmission lines.
As a regulated monopoly utility, Evergy makes its money by earning a return on that kind of spending.
But after a year-long investigation that included four public hearings, state regulators say Evergy still hasn’t eliminated all of their concerns and might be on a path to make its rates the highest in the region.
“There’s a lot to like in the (energy transition) proposal for customers,” Kansas Corporation Commission chair Andrew French said. “But it’s important for Elliott and other investors to remember that all investments in operations must be aligned with customer interests.”
He warned Evergy that any investment made primarily to satisfy shareholders would increase the risk that the commissioners wouldn’t allow them to earn a return on it when the plan officially comes before regulators during the company’s next rate case.
Regulators also showed concern over just how much influence Elliott played in developing the plan.
“This company (Elliott) has a track record of interference on behalf of the shareholders,” Commissioner Susan Duffy said. “Our responsibility is to the ratepayers.”
Evergy officials insist that the plan is necessary to continue to provide reliable service at a reasonable rate.
The electric utility also said that Elliott Management doesn’t have an outsized say over company operations.
Federal regulators have asked Evergy to provide more information about recent changes made to its board of directors.
Shortly after Elliott went public with its demands and Evergy created the plan for phasing out fossil fuels, Elliott gained two seats on Evergy’s board of directors. Elliott also sits on a newly created finance committee that was given broad control over business operations and financial strategies.
The regulators want to determine if Elliott should be considered an affiliate of Evergy and subject to greater regulation and scrutiny.
Hudson Munoz is a researcher with the Communications Workers of America Union. It’s part of an effort to get federal regulators to go further in their investigation. He said Elliott is following a pattern it’s used at other energy companies that could lead to higher utility bills.
“They do what they can to increase the price, the valuation of the company, they extract cash usually through buybacks and dividends and then they move on to their next target,” Munoz said.
The consumer advocacy group Public Citizen has joined Communications Workers of America in its filing with federal regulators. It claims that Elliott has more power at Evergy than it publicly acknowledges and skirts regulation by staying under a 10% ownership threshold.
“That allows them to operate with far more flexibility and far more harm to the public interest,” said Public Citizen Energy Director Tyson Slocum.
Federal regulators have not said if Evergy’s response to their questions was sufficient or if they will be looking into the issue any further.
Brian Grimmett reports on the environment, energy and natural resources for KMUW in Wichita and the Kansas News Service. You can follow him on Twitter @briangrimmett or email him at grimmett (at) kmuw (dot) org.
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