On September 1, the Kansas Corporation Commission (KCC) delivered an order approving the long pending Evergy Kansas Energy Efficiency Investment Act (KEEIA) plan filing, confirming the utility’s 2023-2026 Demand-Side Management (DSM) Portfolio and associated cost recovery mechanisms. Commissioners approved the “Initial Program Settlement” and “Initial Financial Settlement” with certain modifications and conditions, rather than the more recently discussed “Alternative Settlement.”

Commissioners came out with strong messaging in support of energy efficiency, noting that “Kansas competes against other states in many ways, and one competition it is losing is the provision of cost-saving energy efficiency tools to utility customers. The intent of this Order is to implement the goals of our state's highest policymakers and ensure those Kansas residents and businesses with the greatest need to control their bills have options available to do so.”

The road to this decision was long, with Evergy submitting its first application of this process in December 2021. It is also significant as this is the first time that Evergy has had energy efficiency programs approved since its merger in 2018.

The Commission specifically approved the robust “Initial Program Settlement” which was introduced by Evergy in August 2022 after months of discussions, including testimony from interveners and public comments. This proposal is slightly more pared back than the original Evergy December 2021 proposal and includes a suite of nine DSM programs – four for residential customers, four for business customers and one pilot incubator program. From the order, those programs are:

1. Whole Home Efficiency Program: This program provides rebates, discounts, and on-bill financing for HV AC and building envelope measures in single and multifamily residences. It will also provide no cost energy assessments and discounted energy savings kits.
2. Home Energy Education Program: This program helps rural and low-income customers use energy more efficiently through marketing, outreach, and education.
3. Home Demand Response Program: This program helps customers reduce their energy use during peak demand periods. It also provides opportunities for customers to receive free thermostats and water heater controllers.
4. Hard-to-Reach Homes Program: This program provides enhanced incentives, no-cost home upgrades, and no-cost energy assessments and savings kits for low-income and rural customers.
5. Whole Business Efficiency Program: This program provides both variable and fixed incentives to help business customers install efficient equipment and building envelope improvements.
6. Business Energy Education Program: This program provides tools, resources, and guidance for businesses interested in saving money on energy. The program focuses on small businesses.
7. Business Demand Response Program: This program helps business customers decrease their energy usage during periods of peak demand. Potential customers can sign up or be recruited by Evergy.
8. Hard-to-Reach Businesses Program: This program offers enhanced incentives to small businesses and non-profits.
9. Pilot Incubator Program: This program creates a pathway to identify and evaluate new DSM program concepts to meet changing customer needs and integrate evolving technologies.

 

In the Alternative Settlement that was not approved by the Commission, five, more streamlined, programs were proposed, including Business Demand Response, Home Demand Response, Residential Energy Education, Business Energy Education and Hard-to-Reach Homes. As it was proposed more recently in November 2022 by Evergy, KCC Staff and gas utilities involved as intervenors, this option was expected to be approved.

However, Commissioners found that the Initial Settlement is more beneficial and impactful for customers given the ratios of spending to projected energy savings. The Commission argued that the Alternative Settlement’s “more narrow and limited portfolio of programs... will not jumpstart much needed energy efficiency efforts in the State in furtherance of the goals set forth in KEEIA.” It is notable that this view was not shared by all three Commissioners, as a dissenting opinion was also submitted by Commissioner Dwight Keen, arguing the Alternative Settlement better met the requirements of KEEIA while protecting the public interest from unnecessary costs.

The Commission highlighted that there was more disagreement between parties on the financial settlement, and that the program settlement was generally more agreed upon by intervenors – apart from KCC Staff. A Pay As You Save® (PAYS) tariff will be introduced, but not without submission to the Commission for review and approval. Commissioners specifically noted that folks who chose to get involved as commenters in the proceedings were generally supportive of supplementing Evergy’s portfolio of programs with a PAYS program and that large-scale utility EE programs are long overdue in the state. In the Initial Financial Settlement, which creates cost recovery mechanisms for Evergy, modifications from the Commission include a downward change in Earnings Opportunity (EO) from 18% to 15% of net benefits, and additional safeguards and consideration made around the Lost Revenue Adjustment Mechanism (LRAM). For more information on these financial mechanisms, see our explanation of EE rates and incentives.

The record does not contain an estimated bill impact for the Initial Settlements, however, due to a material reduction to many of Evergy's proposed program budgets the Commission expects a total bill impact of less than 1-2%.

Approval of the order was also conditioned on there being no direct ratepayer funding of fuel-switching measures. Commissioners stated that “shoehorning fuel-switching measures into customer-funded energy efficiency programs, when the efficiency benefits of those measures are unknown at best, seems like an overextension of KEEIA's intended purposes,” noting that they think a fuel-switching policy is best addressed through the legislature or a specific, robust process.

The Order specifically mentioned federal funding opportunities, with a modification requiring that prior to the implementation of any programs, and within 60 days, Evergy and KCC Staff discuss and report to the Commission on developments regarding any opportunities and whether modifications of the Order are needed. After this Order, Evergy will continue to work with Staff to file an updated timeline for implementation of the programs.

This is an exciting and unexpected development in Kansas – a state that has not recently been focused on energy efficiency. Many advocates watching these proceedings were concerned that the much less ambitious Alternative Settlement would be approved, reducing the impact of these energy efficiency programs. MEEA is pleased with the support of the Commission and is excited to follow the development of these programs and the benefits they can bring to Kansas energy customers.

For more information, the docket can be accessed here, and the order can be read in full here.