Evergy said it would appeal the Public Service Commission’s October order requiring the company to set up a regulatory liability account for revenue and returns from the Sibley coal plant it is shuttering.
In announcing its third-quarter results in a call with the investment community Thursday, Evergy President and CEO Terry Bassham estimated the annual impact of the Sibley order would be $9 million or $0.03 per share.
“We are extremely disappointed in the outcome of this case. From the beginning we and the commission’s staff opposed the [accounting authority order] request and the cherry-picking of our 2018 rate case and undermining the utility framework in Missouri,” Bassham said. “The commission has denied our request for a rehearing, and now we expect to appeal the order.”
Jobs, too, are on the line since the PSC’s decision.
“We’re going to need to be aggressive and will be aggressive on ongoing expenses,” Bassham said. “One of the things we’re going to go after is headcount, things like that. We always want to avoid a layoff, but we can certainly manage hiring practices. And one of the side effects of something like the order we got is we’re going to have to be very careful about any hiring we do moving forward.”
Given the costs associated with maintaining the old coal plant, Evergy (the result of the Kansas City Power & Light and Westar Energy merger) decided to retire it even though it was still operational. Evergy is still in the process of decommissioning the plant.
The PSC’s order requires Evergy to collect revenue associated with the plant and hold it in a liability fund. What to do with that money will be decided in a future rate case; Evergy expects the next rate case to be no later than 2020, it said in its U.S. Securities and Exchange Commission (SEC) filing.
Evergy recorded a regulatory liability of $6.5 million as of Sept. 30 for the estimated amount of revenues it has collected from customers for the Sibley plant since December 2018 in the SEC filing. The result of the case could mean an estimated $15 million loss in excess of the amount accrued per year until its new rates become effective, Evergy said.
In addition to the earnings impact, the company’s stock was trading close to $68 per share when the commission first announced its order. As of the end of the investor call Thursday morning, EVRG is still trading below $63.
The PSC denied Evergy’s request for a rehearing on Oct. 30.
Late last year, the PSC approved the rate case of what was then Kansas City Power & Light, which allowed the company to continue collecting on the plant until the next rate case. Under the new PISA law, energy companies have increased infrastructure investments in Missouri while increasing the time between rate cases.
But the Office of Public Counsel and Midwest Energy Consumers Group petitioned the PSC to approve an accounting authority order which would require Evergy to collect all revenue associated with the plant, hold it, and record it as a liability.
In October, commissioners approved the order 4-1 with Bill Kenney as the lone dissenting vote.
PSC Chairman Ryan Silvey pointed to the company’s previous stipulation and agreement, noting it had allowed for such an order to occur. He also said approval of the order does not mean the commission is waffling in its support for renewable energy or will deter future utilities from retiring economically inefficient coal plants.
“In their previous stipulation, they agreed to this process. This is not a surprise. This is something that was contemplated by all the parties and signed off on by the company in their last stipulation and agreement,” Silvey said.
Kenney, however, said the company made a decision that was in the best interest of ratepayers and predicted the order would bring a negative financial impact on Evergy.
“I think it is very likely we could see less investment in this part of our jurisdiction at a time when we’re hoping to ramp up investment, particularly in things like renewables,” Chuck Caisley, an Evergy senior vice president, previously told The Missouri Times.
Despite the disagreement, commissioners unanimously agreed the company did not do anything “wrong or illegal.”
Overall, Evergy announced its third-quarter earnings reached $367 million ($1.56 per share) compared to $355 million in the 2018 third quarter ($1.32 per share). It also increased its quarterly dividend to $0.505 per share (annualized to $2.02).
Sibley is about 21 miles east of Kansas City near the Missouri River.
Kaitlyn Schallhorn is a reporter with The Missouri Times and The Missouri Times Magazine. She joined the newspaper in 2019 after working as a reporter for Fox News in New York City. Throughout her career, Kaitlyn has covered political campaigns across the U.S. and humanitarian aid efforts in Africa. She is a native of Missouri who studied journalism at Winthrop University in South Carolina. Contact Kaitlyn at email@example.com.