§ 66-1239 — Electric generating or transmission facility; determination of rate-making principles and treatment; procedure; recovery of construction work in progress costs for new gas-fired generating facilities; limitations; retention of nuclear powered and coal-fired generating facilities in rate base for capacity reserve; annual commission report on electric generating assets and capacity reserve

(a) As used in this section:
(1) "Commission" means the state corporation commission;
(2) "contract" means a public utility's contract for the purchase of electric power in the amount of at least $10,000,000 annually;
(3) "generating facility" means any electric generating plant or improvement to existing generation facilities;
(4) "stake" means a public utility's whole or fractional ownership share or leasehold or other proprietary interest in a generating facility or transmission facility;
(5) "public utility" means the same as defined in K.S.A. 66-104, and amendments thereto; and
(6) "transmission facility" means: (A) Any existing line, and supporting structures and equipment, being upgraded for the transfer of electricity with an operating voltage of 34.5 kilovolts or more of electricity; or (B) any new line, and supporting structures and equipment, being constructed for the transfer of electricity with an operating voltage of 230 kilovolts or more of electricity.
(7) "Weighted average cost of capital" means the same as defined in K.S.A. 2024 Supp. 66-1293, and amendments thereto.
(b) (1) Prior to undertaking the construction of, or participation in, a transmission facility, a public utility may file with the commission a petition for a determination of the rate-making principles and treatment, as proposed by the public utility, that will apply to the recovery in wholesale or retail rates of the cost to be incurred by the public utility to acquire such public utility's stake in the transmission facility during the expected useful life of the transmission facility.
(2) The commission shall issue an order setting forth the rate-making principles and treatment that will be applicable to the public utility's stake in the transmission facility in all rate-making proceedings on and after such time as the transmission facility is placed in service or the term of the contract commences.
(3) The commission in all proceedings in which the cost of the public utility's stake in the transmission facility is considered shall utilize the rate-making principles and treatment applicable to the transmission facility.
(4) If the commission fails to issue a determination within 240 days of the date a petition for a determination of rate-making principles and treatment is filed, the rate-making principles and treatment proposed by the petitioning public utility will be deemed to have been approved by the commission and shall be binding for rate-making purposes during the useful life of the transmission facility.
(5) If the commission does not have jurisdiction to set wholesale rates for use of the transmission facility the commission need not consider rate-making principles and treatment for wholesale rates for the transmission facility.
(c) (1) Prior to acquiring a stake in a generating facility, prior to entering into a new contract or prior to retiring or abandoning a generating facility, or within a reasonable time after retirement or abandonment if filing before retirement or abandonment is not possible under the circumstances, a public utility may file with the commission an application for a determination of the rate-making principles and treatment, as proposed by the public utility, that will apply to:
(A) Recovery in wholesale or retail rates of the cost to be incurred by the public utility to acquire such public utility's stake in the generating facility during the expected useful life of the generating facility or the recovery in rates of the contract during the term thereof; or
(B) reflection in wholesale or retail rates of the costs to be incurred and the cost savings to be achieved by the public utility in retiring or abandoning such public utility's stake in the generating facility, including, but not limited to, the reasonableness of such retirement or abandonment.
(2) Any utility seeking a determination of rate-making principles and treatment under subsection (c)(1) shall as a part of its filing describe how the public utility's stake in the generating facility is consistent with the public utility's most recent preferred plan and resource acquisition strategy submitted to the commission.
(3) In considering the public utility's preferred plan and resource acquisition strategy, the commission may consider if the public utility issued a request for proposal from a wide audience of participants willing and able to meet the needs identified under the public utility's preferred plan, and if the plan selected by the public utility is reasonable, reliable and efficient.
(4) For requests by a public utility for a determination of ratemaking principles and treatment relating to the abandonment or retirement of a nuclear powered or fossil fuel-fired electric generating unit, the commission shall not approve the abandonment or retirement of such electric generating unit, authorize a surcharge or issuance of bonds for the decommissioning of such electric generating unit or take any other action that authorizes or allows for the recovery of costs for the retirement of such electric generating unit, including stranded asset recovery, unless:
(A) The utility demonstrates that the public utility will be able to meet current and reasonably-anticipated future resource adequacy requirements of the regional transmission organization or independent system operator; and
(B) the abandonment or retirement is not expected to harm the utility's customers or decrease the utility's regional rate competitiveness by causing the utility to experience higher costs than would be expected by continuing to operate such electric generating unit in compliance with applicable law, unless, consistent with the integrated resource planning framework utilized by the commission, the commission determines that such higher costs are justified by other factors that are specified by the commission. The utility shall provide the commission with evidence of all known direct and indirect costs of abandonment or retirement of the electric generating unit and demonstrate that cost savings or avoided or mitigated cost increases to customers will occur as a result of the abandonment or retirement of the electric generating unit.
(5) The commission shall issue an order setting forth the rate-making principles and treatment that will be applicable to the public utility's stake in the generating facility or to the contract in all rate-making proceedings and all securitization proceedings on and after such time as the generating facility is:
(A) Placed in service or the term of the contract commences; or
(B) retired or abandoned.
(6) (A) With respect to a new gas-fired generating facility, unless the commission timely elects not to set forth ratemaking principles applicable in the future on the grounds that acquiring a stake in such a generating facility is not reasonable, then notwithstanding any other provision of law, the public utility shall be permitted to implement a new rate adjustment mechanism designed to recover the return on 100% of amounts recorded to construction work in progress on the public utility's books for the public utility's stake in such a generating facility, which shall not exceed the definitive cost estimate found reasonable by the commission in a proceeding conducted pursuant to this section for the public utility's acquisition of the public utility's stake in such generating facility, unless otherwise ordered by the commission in a subsequent proceeding, at the weighted average cost of capital without offset, adjustment or reduction for any other issue or consideration, except that such return shall be in lieu of any otherwise applicable allowance for funds used during construction that would have accrued from and after the effective date of inclusion of construction work in progress in such rate adjustment mechanism. A rate adjustment mechanism authorized pursuant to this section shall become effective not sooner than 365 days after construction of the generation facility begins and within 60 days of the filing for the establishment of such mechanism by the public utility. As construction of the public utility's stake in such a generating facility continues and the balance of construction work in progress grows, the rate adjustment mechanism in effect shall be subject to periodic increases, without adjustment, offset or reduction for any other issue or consideration, except that such periodic increases shall not occur more frequently than once every six months. Except as provided in this section, the public utility's customers shall be charged pursuant to such rate adjustment mechanism until such time as new base rates reflecting the public utility's investment in such generating facility take effect, with such base rates to include a deferral for depreciation expense incurred and carrying costs on any unrecovered portion of such investment at the public utility's weighted average cost of capital as determined in the rate-making proceeding setting such base rates that occurred between the date such generation facility was placed in service on the public utility's books and the effective date of base rates in such proceeding. A rate adjustment mechanism authorized pursuant to this section shall be permitted to remain in effect for a period not to exceed six years.
(B) If a public utility implements a rate adjustment mechanism pursuant to this paragraph and subsequently terminates the initiative to acquire a stake in the generating facility, the commission shall have the authority, after a hearing is held on the matter, to order the public utility to refund customers any amounts collected through such rate adjustment mechanism.
(C) A public utility shall be authorized to implement a rate adjustment mechanism pursuant to this paragraph until December 31, 2030, except that, upon application by such public utility, the commission may authorize the public utility to continue to implement a rate adjustment mechanism pursuant to this paragraph until December 31, 2036. Any such application shall be filed with the commission on or before December 31, 2028. The commission shall issue a determination on an application filed pursuant to this subsection within 240 days of the date that such application is filed. If requested by the public utility, an intervenor in the application docket or commission staff, the commission shall hold a hearing on such application. When considering and making a determination upon such application, the commission may consider factors that the commission deems just and reasonable and condition the commission's determination on any factors that are relevant to the rate adjustment mechanism authorized pursuant to this paragraph. If the commission denies the public utility's application, such denial shall only act to prohibit the public utility from implementing a rate adjustment mechanism after December 31, 2030, and shall not otherwise affect or terminate any rate adjustment mechanism implemented by the public utility pursuant to this section or any regulatory or ratemaking treatment of such rate adjustment mechanism.
(7) The commission in all proceedings in which the cost of the public utility's stake in the generating facility or the cost of the purchased power under the contract is considered shall utilize the rate-making principles and treatment applicable to the generating facility, contract or retired or abandoned generating facility.
(8) If the commission fails to issue a determination within 240 days of the date a petition for a determination of rate-making principles and treatment is filed, the rate-making principles and treatment proposed by the petitioning public utility will be deemed to have been approved by the commission and shall be binding for rate-making purposes during the useful life of the generating facility, during the term of the contract or during the period when the cost of the retired or abandoned generating facility is reflected in customer rates.
(d) (1) It is the intent of the legislature that when a public utility files a petition for a determination of ratemaking principles and treatment pursuant to subsection (b) or (c), consistent with the state corporation commission's customary practices, the commission shall:
(A) Issue a determination on such petition in an expeditious manner; and
(B) when circumstances allow, attempt to issue such determination in a period of time that is less than the 240-day deadline to issue such determination established pursuant to subsection (b) or (c).
(2) In furtherance of such legislative intent, a public utility that intends to file a petition for a determination of ratemaking principles and treatment pursuant to this section shall provide notice to the commission of such public utility's intent to file such petition not less than 30 days before filing a petition pursuant to this section. Upon receipt of such notice, the commission shall provide notice of the public utility's intent to file a petition pursuant to this section to each person or entity that was a party to or an intervenor in the public utility's most recently concluded base rate case.
(3) In any proceeding conducted pursuant to this section, any application for intervention in such proceeding shall be submitted not later than 10 days after the public utility's filing of a petition for a determination of ratemaking principles and treatment. The commission shall adopt a procedural schedule for the proceeding not later than 30 days after a public utility files a petition for a determination of ratemaking principles and treatment pursuant to this section.
(e) The public utility shall have one year from the effective date of the determination of the commission to notify the commission whether it will acquire a stake in the generating or transmission facility, whether it will perform under terms of the contract or whether it will retire or abandon the generating facility.
(f) If the public utility notifies the commission within the one-year period that the public utility will not acquire a stake in the generating or transmission facility, that it will not perform under the terms of the contract or that it will not retire or abandon the generating facility, then the determination of rate-making principles pursuant to subsection (b) or (c) shall be of no further force or effect, shall have no precedential value in any subsequent proceeding, and there shall be no adverse presumption applied in any future proceeding as a result of such notification.
(g) If the public utility notifies the commission under subsection (e) that it will acquire a stake in a generating facility or participate in a purchase power contract and subsequently does not, or that it will retire or abandon a generating facility and subsequently does not, it will be required to notify the commission immediately in the proceeding it initiated pursuant to this section and provide notification of a change in the utility's preferred resource plan as required by commission order.
(h) For nuclear powered and coal-fired electric generating facilities, if determined by the commission to be just, reasonable and necessary for the provision of sufficient and efficient service, an electric public utility shall be permitted to:
(1) Retain such facilities in such utility's rate base;
(2) recover expenses associated with the operation of such facilities that remain in service to provide greater certainty that generating capacity will be available to provide essential service to customers, including during extreme weather events; and
(3) recover any portion of such utility's rate base and prudently incurred expenses necessary for such facilities:
(A) To operate at a low-capacity factor; or
(B) that are offline during normal operating conditions and providing capacity only.
(i) The commission shall prepare and submit to the legislature by December 1 of each year an annual report based on the preceding calendar year that provides:
(1) The number of requests by utilities to retire electric generating units in the state, the nameplate capacity of each of those units and whether the request was approved or denied by the commission;
(2) the impact of any commission-approved retirement of an electric generating unit on the:
(A) Utility's and state's generation capacity by fuel type;
(B) required capacity reserve margins for the utility and the overall capacity reserve margin within the state;
(C) utility's need for capacity additions or expansions at new or existing facilities as a result of the retirement; and
(D) utility's need for additional power or capacity reserve arrangements; and
(3) whether the retirement resulted in stranded costs for ratepayers that will be recovered by the utility through securitization or some other charge on customer bills.
(j) The provisions of subsection (c)(4) shall expire on July 1, 2034.

Legislative History

L. 2003, ch. 148, § 1; L. 2004, ch. 120, § 9; L. 2021, ch. 29, § 15; L. 2024, ch. 60, § 4; July 1.