February 2021 Cold Weather Event

February 2021 Cold Weather Event

In February 2021, severe cold weather swept across Kansas and much of the central U.S. According to the National Oceanic and Atmospheric Administration, the average temperature in the contiguous U.S. was 3.2 degrees Fahrenheit below the 20th-century average.

Extremely low temperatures and precipitation forced the closure or temporary cessation of wind turbines and natural gas plants across Kansas.

On February 14, the Governor declared a State of Disaster Emergency (https://governor.kansas.gov/wp-content/uploads/2021/02/2-14-2021-Extreme-Weather-Disaster-Declaration-Executed.pdf), warning of impending power outages and “critical energy supply shortages.”

To prevent overwhelming electrical grids as consumption increased, the Southwest Power Pool (SPP), a 17-state regional transmission organization that manages power supplies and transmission infrastructure, directed Evergy and other electric utilities to initiate rolling blackouts, systematically cutting power to customers for brief periods of time.

On February 15, SPP interrupted power for about 1.5 percent of its demand for power for almost an hour. On February 16, SPP again interrupted power for about 6.5 percent of its demand for power for more than three hours.

In May 2021, SPP discussed with the Kansas Corporation Commission (KCC) members why the SPP power grid was unstable during the Cold Weather Event. Power generation did not meet expectations because there was not enough fuel for the power plants. In addition, during the cold weather, prices for natural gas rose by over 100 percent. Some wind turbines were iced-over due to foggy conditions that froze in the cold temperatures, resulting in 7,000 megawatts of power not generated. In addition, there were record amounts of power consumption by customers trying to keep their homes warm.

In July 2021, SPP attributed the power outages to fuel shortages for the power plants, especially with natural gas. During the worst of the cold weather, SPP had 39,777 megawatt hours of power generated. The five-year average of generation is 55,733 megawatt hours.

Senate Sub. for HB 2072

The Cold Weather Event occurred during the 2021 Legislative Session. In response to the event, the Legislature passed Senate Sub. for HB 2072, which creates the Utility Financing and Securitization Act (UFSA), allowing for the securitization of utility assets to recover energy transition costs for electric public utilities whose retails rates are subject to the jurisdiction of the KCC. The UFSA also allows electric and natural gas public utilities whose retail rates are subject to the KCC to pursue securitization to help finance qualified extraordinary expenses, such as fuel costs incurred during extreme weather events.

SB 245

SB 245 (2021 legislation) contained the original contents of Senate Sub. for HB 2072. On February 18, 2021, the Senate Committee on Financial Institutions and Insurance held a hearing on SB 245, which would have created the Kansas Grid Resiliency, Innovations, and Dependability Act. This bill would have authorized the KCC to issue ratepayer-backed securitized loans to finance unrecovered assets.

In response to the Cold Weather Event, the bill was revised, and the Senate Committee held a hearing on the revised version of SB 245 on March 17, 2021. Representatives of Black Hills Energy, Evergy, KCC, Kansas Gas service, Kansans for Lower Electric Rates, and the Kansas Industrial Consumers Group testified as proponents.

The proponents generally stated the new addition to the bill regarding securitization for qualified extraordinary costs would ease expense burdens for public utilities and their ratepayers after unforeseen weather crises, such as the Cold Weather Event. The KCC stated it will approve financing orders for securitization bonds only if it finds the bonds will reduce costs for ratepayers. An AARP representative testified as an opponent to the bill, stating the bill would hurt Kansas ratepayers and that utility expenditures should be subjected to full regulatory review.

Fiscal Impact

The 2021 Legislature added funding to several state entities for some energy bills related to the February cold weather event in FY 2021, and added language to lapse up to each amount of moneys below if federal funds are available.

The Legislature:

• Added $155,000, all from the State General Fund (SGF), to the state hospitals;
• Added $1.4 million, all SGF, to the Kansas Department of Corrections;
• Added $668,061 to the Adjutant General’s Office, including $179,519 SGF; and
• Added $44,835 to the Kansas Highway Patrol, all from special revenue funds, and increased the transfer from the State Highway Fund by that same amount.

On October 8, 2021, the Director of the Budget, Kansas Division of the Budget, provided testimony to the Legislative Budget Committee that federal funds were not available to be used to cover the costs of the energy bills.