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Archive for Thursday, March 15, 2001

Power firm eyes Kansas as House OKs tax breaks

March 15, 2001

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— A North Carolina energy company confirmed Wednesday that it was prospecting northeast Kansas for a site to build a new $200 million power plant. The news came the same day Kansas lawmakers overwhelmingly approved tax breaks for such companies.

Several legislators said the tax breaks were unfair to consumers and could lead to higher rates and higher taxes on individuals, but their opinions were drowned out.

The House approved the tax breaks on voice votes. A final vote is scheduled for today. The Senate approved its versions of the proposals, 38-2.

Movement on the bills occurred as Duke Energy Corp., a major builder of power plants, confirmed to the Journal-World it might build a plant in northeast Kansas.

Rick Rhodes, a spokes-man for the Charlotte, N.C.-based company, said Duke was in the early stages of evaluating whether to build a $200 million, 640-megawatt plant in the area. A decision will probably be made by early next year, he said.

Rhodes declined to be more specific about the location, but Leavenworth County economic development officials have said their area was under consideration for construction of a power plant.

Tax breaks' role

Rhodes said Duke Energy considers tax incentives when it chooses a location, but whether Kansas adopted the proposed tax breaks would not be the most important factor in the company's decision.

"Bottom line, it's economics that determines a project," Rhodes said, and that would include other factors, such as the availability of transmission lines.

But power plant bills surged Wednesday in both the House and Senate.

Proponents of the tax breaks said more power plants are needed in Kansas because the state is nearing its electrical generating capacity and could face a situation similar to one in California, where power shortages have been seen for months.

"It's time we get on with power plant construction in this state so that we won't have what happened in California no lights," said Rep. Carl Holmes, R-Liberal. Holmes said Kansas was about 10 years away from outreaching its capacity.

The House measures would give 10-year property tax abatements to independent plants that sell power on the open market to electrical utilities and to plants built by electrical utilities, which could sell electricity both in the regulated and unregulated markets.

In both cases, after 10 years, the plants would be assessed at the rate of 25 percent instead of 33 percent, which is the current rate of taxation on utilities.

Rep. Doug Spangler, D-Kansas City, argued against the bills, saying they would reduce tax revenue to local and state governments, causing increased taxes on others to bridge the gap.

But Holmes argued the economy would benefit from the construction costs and jobs produced by the power plants.

A policy change

The bills also would alter a major state policy. Currently, utilities are not allowed to figure into their rate base the cost of building their plants while the construction is in progress. Under the House legislation, that would be allowed.

Several House members squawked at this proposal, saying ratepayers should not have to pay for the risks associated with building a new plant.

"In a free-market economy, the linchpin is that investors take the capital risks," State Rep. Bill Reardon, D-Kansas City, said.

But supporters said allowing companies to recover their costs during construction will level rates once the plants come on line.

A move to prevent companies from having the chance to have their ongoing construction costs figured in the rate base was defeated 73-34.

In the Senate, members approved legislation aimed at giving tax breaks to the independent or so-called "merchant" power plants, which is what Duke Energy is considering building in northeast Kansas.

Rhodes, the spokesman for Duke Energy, said the company builds from 10 to 12 natural-gas fired plants per year, and just completed one in Missouri.

Walker Hendrix, head of the Citizens Utility Ratepayer Board, said the Legislature is rushing into giving tax breaks when it should be focusing on conservation.

Staff writer Scott Rothschild can be reached at (785) 354-4222.

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