Session of 1998
By Committee on Appropriations
            9             AN ACT concerning natural gas; declaring certain sales and acquisitions
10             relating thereto not to be prudent, in the public interest or just and
11             reasonable.
13       Be it enacted by the Legislature of the State of Kansas:
14           Section 1. This act may be cited as the Kansas natural gas consumer
15       protection act.
16           Sec. 2. As used in this act:
17           (a) ``Commission'' means the state corporation commission.
18           (b) ``FERC'' means the federal energy regulatory commission.
19           (c) ``Purchase gas adjustment (PGA)'' means any regulatory mecha-
20       nism that is used by a natural gas public utility to assess customers on an
21       ongoing basis for the cost of natural gas used to supply natural gas for
22       retail distribution.
23           (d) ``Person'' means any individual, corporation (including coopera-
24       tives), public trust or authority, partnership, joint venture or other form
25       of business entity or voluntary association.
26           Sec. 3. (a) No cost of natural gas shall be assigned or charged to
27       Kansas consumers as part of a PGA or a utility rate case, if such gas is
28       sold above market prices as determined by the commission and the sale
29       has at any time been the subject of a commission order which has con-
30       cluded that the contract relationship between the supplier and the buyer
31       is not strictly at ``arms length'' and the buyer has sacrificed benefits of
32       considerable importance.
33           (b) No sale of natural gas to a local distribution company shall be
34       considered in the public interest and just and reasonable if the sale meets
35       the description in subsection (a).
36           Sec. 4. (a) The commission shall have the authority to disallow any
37       natural gas price above market prices as determined by the commission,
38       if:
39           (1) The commission determines that Kansas ratepayers funded the
40       development of leases from which such gas is sold and were denied any
41       benefits from the sale of those leases as part of corporate restructuring
42       that resulted in stockholders receiving the economic benefits of the leases;
43       and

HB 3011


  1           (2) the gas from the leases is sold or assigned to Kansas consumers
  2       under contracts which do not contain provisions which allow for termi-
  3       nation or renegotiation of the contract based on market conditions.
  4           (b) The commission is authorized to make such determinations as the
  5       FERC has acknowledged are reserved to the states in order no. 528-A or
  6       order no. 636, which permit the absorption of costs by local distribution
  7       companies.
  8           Sec. 5. (a) Any natural gas sale described in subsection (a) of section
  9       3 shall be determined not to have been prudent under state law.
10           (b) Any acquisition, after January 1, 1998, of natural properties or
11       facilities by any person in the state of Kansas that is authorized to do
12       business as a natural gas public utility shall not be considered in the public
13       interest if the seller or any of its affiliates are permitted to make sales of
14       natural gas described in subsection (a) of section 3 at prices above those
15       determined by the commission to be market prices.
16           Sec. 6. If any provision of this act or its application to any person or
17       circumstances is held invalid, the invalidity shall not affect other provi-
18       sions or applications of this act that can be given effect without the invalid
19       provision or application. To this end the provisions of this act are sever-
20       able.
21           Sec. 7. This act shall take effect and be in force from and after its
22       publication in the Kansas register.