HOUSE BILL No. 2177
By Representative Sloan
AN ACT concerning electric service; relating to retail service areas; pro-
viding for determination of certain rates and charges; repealing K.S.A.
66-1,159 through 66-1,165, 66-1,168, 66-1,169a, 66-1,169c, 66-1,170
through 66-1,176, 66-1,176a, 66-1,176b and 66-1,176c and K.S.A. 1996
Supp. 66-1,158 and 66-1,169b.
Be it enacted by the Legislature of the State of Kansas:
Section 1. As used in sections 1 through 9:
(a) ``Block'' means an electric customer service block designated by
the commission under section 3.
(b) ``Broker'' means any person or entity buying, aggregating, mar-
keting or brokering, or offering to buy, aggregate, market or broker elec-
tricity, at wholesale or for retail sale to the public in this state.
(c) ``Commission'' means the state corporation commission.
(d) ``Decommissioning costs'' has the meaning provided by K.S.A. 66-
128l and amendments thereto.
(e) ``Distribution'' means the business of distribution of electricity or
the ownership, operation or control of distribution facilities.
(f) ``Distribution facility'' means any plant or equipment, other than
a transmission facility, that is used for the distribution of electricity.
(g) ``Generation'' means the business of producing, manufacturing or
generating electricity for sale at wholesale or for retail sale to the public.
(h) ``Retail electric supplier'' means any person or entity furnishing
or offering to furnish retail electric service in this state.
(i) ``Transmission'' means the business of transmission of electricity
or the ownership, operation or control of transmission facilities. ``Trans-
mission'' does not include delivery of electric service to a retail customer.
(j) ``Transmission facility'' means any plant or equipment used for the
transmission of electricity as determined by the Federal Energy Regu-
latory Commission pursuant to federal law.
Sec. 2. (a) On and after January 1, 1999, generation shall not be
subject to regulation as a public utility unless otherwise specifically pro-
vided by law.
(b) On and after January 1, 1999, the commission shall continue to
have jurisdiction to regulate transmission as a public utility.
(c) On and after January 1, 1999, the commission shall continue to
have jurisdiction to regulate distribution as a public utility.
Sec. 3. (a) Subject to the provisions of this act, the commission shall
cause the state to be divided into electric customer service blocks and
shall assign all areas of the state to a block. In designating blocks, the
commission shall work in cooperation with existing electric utilities and,
to the extent practicable, shall: (1) Follow existing infrastructure for the
transmission and distribution of electric service; and (2) include in each
block both residential customers and commercial and industrial custom-
ers of various sizes. No customer within a block shall purchase electric
service from anyone other than the retail electric supplier authorized to
serve that block unless the customer generates an average of at least 50%
of the electric power used by the customer.
(b) Any retail electric supplier desiring to serve customers in a block
after December 31, 1998, shall file with the commission proposed rates
for all classes of customers within the block. The proposed rates shall be
filed on or before June 30, 1998, and shall be for a period of not less than
three years nor more than five years. The commission shall evaluate pro-
posed rates filed by a retail electric supplier under this section and shall
determine whether all customers in the block will benefit from service
by the supplier, taking into consideration all factors, including economic
benefits to customers and reliability, efficiency and quality of service. The
commission shall also determine the reasonableness of charges to the
retail electric supplier for other suppliers' previous capital investment in
facilities and equipment for delivery of electricity to customers within the
block. Within 120 days after the date that the proposed rates are required
to be filed with the commission, the commission shall enter an order
authorizing a retail electric supplier to serve the block and establishing
the rates to be charged each class of customers in the block and the
conditions that the supplier must meet if the supplier is going to provide
retail electric service to customers in the block. Those conditions shall
include any requirements agreed upon by the commission and the sup-
plier but shall include at a minimum a requirement that:
(1) No regulation, practice or act affecting or relating to any service
performed or to be performed by the supplier for the supplier's customers
shall be unreasonable, unfair, unjust, unreasonably inefficient or insuffi-
cient, unjustly discriminatory or unduly preferential; and
(2) no service performed or to be performed by the supplier for the
supplier's customers shall be unreasonably inadequate, inefficient, unduly
insufficient or unavailable.
(c) Before expiration of the rates of a retail electric supplier author-
ized to serve a block pursuant to subsection (b), the commission shall
provide for the filing of proposed rates by retail electric suppliers desiring
to serve the block and shall determine the supplier which will serve the
block in the same manner as provided by subsection (b).
(d) If no retail electric supplier files proposed rates for a block, the
retail electric supplier most recently serving the block shall continue serv-
ing the block at rates approved by the commission.
(e) The commission may require any electric service provider to file
with the commission a performance bond conditioned on the supplier's
delivery of reliable and quality power.
Sec. 4. (a) The commission shall provide for retail electric suppliers
furnishing retail electric service on the effective date of this act to recover,
by charges approved by the commission and based on use of distribution
(1) Fifty percent of the reasonable costs for a 10-year period begin-
ning July 1, 1997, that: (A) Are associated with the production of elec-
tricity from facilities in existence on June 30, 1997; (B) may not be re-
covered by the competitive market price for generation; and (C) were
approved by the commission before July 1, 1997, for inclusion in the
supplier's ratebase; and
(2) an appropriate share, not to exceed 50%, of decommissioning
costs for a 10-year period beginning on the date of the commencement
of decommissioning that: (A) Are associated with decommissioning of
facilities in existence on June 30, 1997; (B) may not be recovered by the
competitive market price for generation; and (C) were approved by the
commission before July 1, 1997, for inclusion in the supplier's decom-
(b) On and after January 1, 1999, all retail electric suppliers' con-
tractual commitments for purchased power that are in existence on the
effective date of this act and are in excess of the competitive market price
for generation shall be null and void except as provided in section 8.
Sec. 5. (a) The commission, with or without notice, may make any
investigation that the commission determines necessary either on the
commission's own motion or on the filing with the commission of a written
complaint alleging that a retail electric supplier has violated the rates or
conditions established by the commission's order authorizing the supplier
to serve a block.
(b) If, after notice to the retail electric supplier and any complainant
and a hearing in accordance with the provisions of the Kansas adminis-
trative procedure act, the commission determines that a retail electric
supplier has violated the rates or conditions established by the order of
the commission that authorized the supplier to serve a block, the com-
mission may enter any remedial orders that the commission determines
to be just, reasonable and necessary. Such orders may include, if appro-
priate, an order revoking the supplier's authority to serve any or all blocks
in the state for a period of not more than 10 years.
(c) All orders of the commission issued under this section shall be
served on the retail electric supplier affected by the order. The order
shall become effective on the date established by the commission but not
less than 30 days after service of the order.
Sec. 6. (a) The commission shall regulate all brokers for the purpose
of ensuring reliable customer service and the integrity of transmission
and distribution systems.
(b) (1) Each broker, before engaging in business as a broker, shall
be licensed by the commission. The broker shall file with the commission
a notarized application that includes the following information and any
additional information required by the commission pursuant to rules and
regulations adopted by the commission to protect the public interest: (A)
The legal name and business address of the broker; (B) the state where
organized, date of organization and articles of incorporation, association,
partnership agreement or other similar document regarding legal organ-
ization; (C) the name and business address of all officers and directors,
partners or other similar officials; (D) the name, title and telephone num-
ber of a customer service contact person; (E) the name, title and tele-
phone number of a regulatory contact person; (F) the name, title and
address of the registered agent for service of process; (G) a brief descrip-
tion of the nature of the business being conducted; and (H) evidence,
satisfactory to the commission, of the broker's financial responsibility to
meet the requirements of customer service and the transmission and dis-
tribution systems. An amended license application shall be filed within
10 days after any change in the information included in the application
as filed or previously amended.
(2) A license application shall become effective 30 days after filing
with the commission unless rejected by the commission during that pe-
riod. The commission, if it rejects the application, shall specify in writing
the reasons for rejection.
(3) After notice and an opportunity for hearing in accordance with
the Kansas administrative procedure act, the commission may suspend or
revoke a broker's license for cause.
Sec. 7. (a) The commission shall adopt, for implementation and en-
forcement on and after January 1, 1999, tariffs for the use of distribution
facilities in this state. The tariffs shall be based on kilowatt hours distrib-
uted and shall be in amounts determined by the commission to be nec-
essary for the purposes provided by subsection (b). The tariffs shall be
collected by the person engaging in transmission and paid by that person
to the commission. The commission shall remit the entire amount col-
lected to the state treasurer, who shall deposit it in the state treasury and
credit it to the electric energy programs fund.
(b) There is hereby established in the state treasury the electric en-
ergy programs fund. Moneys credited to the fund shall be expended only
for the purposes of assisting individuals qualified for public assistance to
pay the costs of electric service, paying compensation to electric service
providers of last resort, and encouraging research in and development of
alternative residential heating and cooling technologies, giving priority to
resident researchers and developers. Expenditures from the fund shall be
made in accordance with appropriation acts upon warrants of the director
of accounts and reports issued pursuant to vouchers approved by the
chairperson of the commission or a person designated by the chairperson.
On or before the 10th day of each month, the director of accounts and
reports shall transfer from the state general fund to the electric energy
programs fund interest earnings based on:
(1) The average daily balance of moneys in the electric energy pro-
grams fund for the preceding month; and
(2) the net earnings rate of the pooled money investment portfolio
for the preceding month.
Sec. 8. (a) An area served by an electric municipal utility or electric
cooperative utility shall not be included in any block and such utility shall
continue to serve such area if the members of the cooperative or the
voters of the city vote to exempt the utility from this act in the manner
provided by subsection (b).
(b) To be exempt under subsection (a), a cooperative shall hold an
election as follows:
(1) An election under this subsection may be called by the board of
trustees of the cooperative or shall be called not less than 180 days after
receipt by the board of trustees of a valid petition, the content of which
has been approved by the state corporation commission and which has
been signed by not less than 10% of the members of the cooperative.
(2) The proposition for exemption of the cooperative shall read:
``Shall the (name of the cooperative) be exempt from the provisions of
Kansas law relating to retail wheeling of electrical service?'' The propo-
sition shall be printed at the top of each page of any petition filed under
(3) The proposition for exemption of the cooperative shall be pre-
sented to a meeting of the members of the cooperative. The notice of the
meeting shall set forth the proposition for exemption and the time and
place of the meeting. Notice to the members shall be written and deliv-
ered not less than 21 or more than 45 days before the date of the meeting.
(4) Voting on the proposition for exemption of the cooperative shall
be by mail ballot. If the proposition is approved by the affirmative vote
of not less than a majority of the members voting on the proposition, the
cooperative shall notify the state corporation commission in writing of the
results within 10 days after the date of the election.
(c) To be exempt under subsection (a), a city shall hold an election
(1) An election under this subsection may be called by a majority vote
of the governing body of the city or shall be called not less than 180 days
after receipt by the city clerk of a valid petition signed by not less than
10% of the registered voters of the city.
(2) The proposition for exemption of the city shall read: ``Shall the
(name of the city) be exempt from the provisions of Kansas law relating
to retail wheeling of electrical service?'' The proposition shall be printed
at the top of each page of any petition filed under this subsection.
(3) The proposition for exemption shall be submitted to the regis-
tered voters of the city at a special election to be called for that purpose
and to be held not later than 180 days after the vote of the governing
body or the filing of the petition or at the next regular city election or
general election which will occur not less than 60 days and not more than
180 days after the vote of the governing body or the filing of the petition.
The election shall be conducted, and the votes counted and canvassed,
in the manner provided by law for question submitted elections of the
(4) If the proposition for exemption of the city is approved by the
affirmative vote of not less than a majority of the qualified voters voting
on the proposition, the governing body shall notify the state corporation
commission in writing of the results within 10 days after the date of the
final canvass of the election.
(d) An election under this section shall not be held by the same elec-
trical municipal utility or electric cooperative utility more often than once
every three years.
(e) If an electric municipal utility or electric cooperative utility is not
exempt from the provisions of this act and the utility owns generating
capacity, the commission shall assist the utility in selling or otherwise
recovering the utility's investment in generation facilities. The commis-
sion may grant a retail electric supplier authorization to serve a block for
a period of 10 years if the block includes an area served by an electric
municipal utility or electric cooperative utility on the effective date of this
act and the supplier purchases or otherwise compensates the utility for
the utility's investment in generation facilities.
Sec. 9. The commission may adopt such rules and regulations as rea-
sonably necessary to carry out the provisions of sections 2 through 8.
Sec. 10. (a) Any person or entity engaging in generation, as defined
by section 1, in this state may receive a rebate of 5% of the ad valorem
taxes levied by the state and paid by such person or entity on property
used in generation if:
(1) At least 10% of the fuel used by the person or entity in generation
in this state is household, commercial and industrial waste; or
(2) the person or entity has implemented demand side conservation
programs that result in a demonstrable reduction of at least 10% in annual
electric consumption by the person's or entity's customers in this state.
(b) Applications for rebates provided for by this section shall be sub-
mitted in the manner and subject to the conditions provided by rules and
regulations of the secretary of revenue.
(c) There is hereby established in the state treasury a fund to be used
for the payment of rebates provided for by this section. The rebate fund
shall be held by the state treasurer and shall be maintained by the sec-
retary of revenue from the property tax collections in an amount deter-
mined by the secretary of revenue as necessary for the purpose of paying
(d) The secretary of revenue shall adopt rules and regulations to ad-
minister the provisions of this section.
Sec. 11. As used in sections 11 through 17:
(a) ``Commission'' means the state corporation commission.
(b) ``Gas-fired electric generation facility'' means any physical plant
that is used for the production, manufacture or generation of electricity
from natural gas and has a capacity or 50 or more megawatts.
Sec. 12. No person or entity may begin site preparation for or con-
struction of a gas-fired electric generation facility or an addition to a gas-
fired electric generation facility or exercise the right of eminent domain
to acquire any land in connection with site preparation for or construction
of any such facility or addition, without first acquiring a permit from the
commission. Any such person or entity desiring to obtain such a permit
shall file an application with the commission, setting forth therein that
the person or entity proposes to construct a gas-fired electric generation
facility or an addition to a gas-fired electric generation facility. Such per-
son or entity shall file with the application any such documents pertaining
to the construction, operation and maintenance of the proposed facility
or addition as required by rules and regulations of the commission. Upon
the filing of the application, the commission shall fix a time for hearing
on such application, which shall be not less than 30 nor more than 180
days from the date the application was filed and shall be conducted in
accordance with the provisions of the Kansas administrative procedure
act, to determine whether the proposed will have a substantial adverse
impact on residential natural gas rates and whether such impact is out-
weighed by the considerations described in subsection (b) of section 13.
The hearing shall be held in Topeka.
Sec. 13. (a) Except as otherwise provided in this act, the rules and
regulations adopted by the commission pursuant to K.S.A. 66-106 and
amendments thereto to govern the commission's proceedings shall be
applicable to any proceeding before the commission under sections 11
through 17. The applicant shall proceed with the introduction of evidence
of the impact of proposed gas-fired electric generation facility or addition
to a gas-fired electric generation facility. The burden of proof in any such
matter shall be upon the applicant and shall be established by a prepon-
derance of the evidence. All parties present or represented by counsel at
the hearing shall have an opportunity to be heard and the right to cross-
examine any witness appearing before the commission at the hearing. The
commission shall cause a transcript to be made of the hearing. All costs
of any hearing shall be taxed against the applicant. The hearing and all
parties' arguments shall be completed within 90 days after the com-
mencement thereof. At any time after the commencement of the hearing,
the applicant may withdraw its application for the permit.
(b) The commission shall make findings of fact and file such findings
with the commission's decision to grant, grant conditioned by such find-
ings or withhold the permit applied for, except that whenever approval
of applications are pending with or must be obtained from any state reg-
ulatory authority which relate to the operation of any such facility or
addition to a facility, the commission shall postpone its decision until
proof of the approval or disapproval of any such application is received.
In any case where a state regulatory authority cannot render final approval
of any such application until the facility or addition to a facility is in
operation, the commission shall accept as proof of approval or disapproval
the state regulatory authority's certification of probable acceptability or
unacceptability of an application. If the commission determines that a
proposed gas-fired electric generation facility or addition to such a facility
will have a substantial impact on residential natural gas rates, the com-
mission shall consider and make determinations on the following factors:
(1) Whether or not the electric generating capacity of the proposed facility
or addition to a facility meets or contributes to the meeting of the elec-
trical energy needs of the people of this state considering the probable
future statewide electrical energy needs thereof; and (2) whether or not
available electrical generating capacity exists within the state that is ca-
pable of being distributed economically, reliably, technically and environ-
mentally. If the commission determines that a necessity exists for electric
generation capacity to be provided by a proposed gas-fired electric gen-
eration facility or addition to a gas-fired electric generation facility, the
commission shall determine whether that necessity outweighs any sub-
stantial adverse impact of the facility or addition on residential natural
gas rates. Upon a determination that the necessity exists for the proposed
facility or addition and that the necessity outweighs the substantial impact
on residential natural gas rates, the commission shall issue to the applicant
a permit to construct such facility or addition thereto. Upon the issuance
of such permit, no local ordinance, resolution or regulation shall prohibit
the construction of the facility or addition, and the permittee may proceed
with such facility or addition thereto notwithstanding any requirement to
obtain any building permit under any local zoning ordinance, resolution
Sec. 14. No cause of action arising out of any decision of the com-
mission under sections 11 through 17 shall accrue to any party, unless
such party has petitioned for reconsideration. In any subsequent action
or proceeding in the supreme court, no party shall urge or rely upon any
ground not set forth in the petition.
Sec. 15. Any action of the commission pursuant to section 14 is sub-
ject to review by the supreme court in accordance with the act for judicial
review and civil enforcement of agency actions. The supreme court, in
the court's discretion, may require the appellant to file an appeal bond,
conditioned on payment of all court costs incurred incidental to such
Sec. 16. Any action for review pursuant to section 15 shall have prec-
edence over all other hearings and shall be heard not later than the first
term of court after the action is commenced and the court shall decide
all such actions within 60 days after being docketed in such court.
Sec. 17. All decisions of the commission pursuant to section 14 shall
become operative and effective 30 days after the service of the decision
as provided by law, except that if a petition for reconsideration is filed,
the decision shall become operative and effective 30 days after the order
or decision of the commission denying the petition or if the petition is
granted the decision as originally entered or as modified shall become
operative and effective 30 days after the service of the decision of the
commission on reconsideration. After the lapse of the time within which
proceedings could be taken to obtain a review of such decision, no pro-
ceedings to obtain such review having then been taken, such decision
shall be held to be conclusive as to the matters involved therein in any
collateral suit or proceedings.
Sec. 18. For the purposes of section 1 of article 11 of the constitution
of the state of Kansas and article 5a of chapter 79 of the Kansas Statutes
Annotated, electric public utility property, whether real or personal, tan-
gible or intangible, includes only property subject to regulation and in-
cluded in electric public utility rate bases by the state corporation com-
Sec. 19. On and after January 1, 1999, K.S.A. 66-1,159 through 66-
1,165, 66-1,168, 66-1,169a, 66-1,169c, 66-1,170 through 66-1,176, 66-
1,176a, 66-1,176b and 66-1,176c and K.S.A. 1996 Supp. 65-1,158 and 66-
1,169b are hereby repealed.
Sec. 20. This act shall take effect and be in force from and after its
publication in the statute book.