Kansas utility regulators may ask U.S. Supreme Court to review rate case

photo by: Associated Press

In this Oct. 10, 2017 photo, the Supreme Court in Washington, D.C. is seen at sunset.

Kansas utility regulators said Thursday that they may ask the U.S. Supreme Court to review a case challenging the federal government’s authority to set certain kinds of rates that ultimately affect every electric customer’s monthly bills.

But first, they want advice from Kansas Attorney General Derek Schmidt.

The Kansas Corporation Commission voted 3-0 to ask Schmidt whether it would be possible to appeal a decision of a federal appellate court, which ruled in February that the KCC had no standing to challenge a decision from the Federal Energy Regulatory Commission, or FERC, involving rates charged by interstate electric transmission companies.

The case involves an aspect of the public utility business that most customers rarely think about, but which can have a substantial impact on the ultimate rates they pay for electricity — the wholesale purchase of power from one utility to another through transmission lines that run across state lines.

Those are the kinds of transactions that enable, for example, Westar Energy to buy power, when it needs to, from a hydroelectric dam in Texas. The cost of transmission across those lines is then automatically built into customers’ utility bills.

The authority to decide what companies get to construct those transmission lines, establish rates and recover charges on behalf of the transmission companies’ lines belongs to a number of regional “power pools” across the United States. Kansas is a member of the Southwest Power Pool, which also serves all or parts of 13 other states.

Those power pools, in turn, are regulated by FERC which, under federal law, is required to review and approve rates to ensure that the rates being charged are “just and reasonable.”

Companies are given authority to construct new projects through a bidding process, and that process is open to both existing transmission companies and new companies just entering the market.

The controversy began in 2015 when two new companies, Transource and Kanstar, decided they wanted to get into the market in the SPP region. Both are holding companies that sought to set up a number of different state-specific subsidiaries in the region, starting with Kansas.

Those companies sought to obtain preapproval for the base rates they could charge to recover costs, if they were to construct a project in Kansas. In addition, they wanted the preapproved rates in Kansas to be used as a template for future subsidiaries they might set up in other states without having to go through the same application and review process again.

Preapproval was needed, they argued, because without it, they would be at a competitive disadvantage to existing companies that already have rates in place. Also, they said, in order to compete, they must submit their bids within 180 days of notice, but it can take upward of a year or two for FERC to approve their rates, thus making it impractical to wait for FERC approval before the bidding window opens.

The KCC filed objections in both of those cases, arguing that FERC had no authority to approve rates for future subsidiaries that hadn’t even been formed yet. By doing so, KCC said, the burden of proof would be reversed in future cases. Instead of transmission companies and FERC bearing the burden to show that rates were just and reasonable, state regulators would have to prove they were unjust and unreasonable.

In 2016, though, FERC rejected those arguments. The KCC appealed to the D.C. Circuit Court of Appeals, but in February, the appellate court rejected the state’s argument, saying it did not have standing because it had not yet suffered any specific harm.

Attorney General Schmidt is now being asked whether it would be worth the state’s time and effort to appeal further.


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