Dive Brief:
- Evergy’s five-year capital expenditure plan has grown nearly 64% in four years to $7.6 billion as part of a surge in spending by U.S. utilities, according to a report by Kansas Corporation Commission staff.
- However, Evergy’s spending plan is below the average of other electric-only investor-owned utilities and will likely lead to “moderate” rate increases, KCC staff said in the report released Monday.
- The report is part of a KCC proceeding that is an example of how some state utility regulators have increased their scrutiny of the level and nature of utility capital expenditures and their potential effects on utility rates and service, Paul Patterson, an equity analyst at Glenrock Associates, said Tuesday.
Dive Insight:
“While Evergy’s propensity over the last four years has been to increase its capital expenditure budgets higher and higher with each iteration, other national and regional electric-only utilities are increasing their capital plans robustly as well,” KCC staff said.
As long as the spending remains below the average national and regional peer utility spending, Evergy should continue to make progress towards achieving regionally competitive rates and reliable service, KCC staff said.
Compared to last year’s capital plan, Evergy, with about 1.7 million customers in Kansas and Missouri, estimates its latest plan will increase rates by 5% for its Evergy Kansas Central customers and slightly decrease rates for its Evergy Kansas Metro customers.
Evergy’s annual 5-year capital plans have increased 64% since 2020
The $824 million, or 12.1%, increase in Evergy’s 2023-2027 capital plan from the previous plan is largely caused by spending on economic development in Kansas, maintaining its generating fleet, and new generation to meet capacity requirements, the utility company said.
Evergy’s planned capital expenditures as a percentage of its existing net plant — a proxy for relative rate base growth — is 18%, compared to the 23.3% average of its regional peers, KCC staff said.
Using that metric, the electric U.S. utility companies with the highest expected net plant growth are NextEra Energy at 98.3%, Eversource Energy at 48.3%, Idacorp at 35.6%, Allete at 32.9% and PNM Resources at 28.5%, KCC staff said, citing S&P Global Market Intelligence data.
S&P expects a “seismic shift” in utility capital expenditures leading to record-setting spending starting this year, according to a report included with the KCC staff filing. The planned spending is driven by the need to replace aging infrastructure, state renewable portfolio standards, federal infrastructure investment plans and clean energy tax credits, S&P said.
Evergy plans to add about 3,300 MW of renewable energy and about 1,300 MW of hydrogen-capable advanced combined cycle generation by 2035 while retiring about 1,900 MW of coal-fired capacity, the Kansas City, Missouri-based company said in a June 15 update to its integrated resource plan.
Evergy is grappling with low residential load growth, regional rate competitiveness goals, ratepayer energy burden and the pressure to build up its rate base and increase shareholder value, the Citizens' Utility Ratepayer Board said in comments on the utility company’s capital spending plan.
Inflation is easing but still challenging consumers, the residential and small commercial ratepayer advocacy group said.
“The challenge of balancing the means to maintain sufficient and efficient service through higher investment levels and the bill impact on ratepayers drives the need for utilities and regulators to be creative,” the group said.
The Citizens' Utility Ratepayer Board and the KCC staff recommended that the commission accept Evergy’s capital investment plan report. The details of the capital plan will be reviewed in rate cases and through the state’s resource planning process.
Evergy is required to file annual reports with the KCC on its capital spending plans. The requirement grew out of the commission’s approval in 2018 of the Westar Energy and Great Plains Energy merger, which created Evergy.
