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Substitute for HOUSE BILL No. 2435
AN A CT concerning natural gas public utilities; relating to the gas system reliability
surcharge; authorizing natural gas public utilities to recover certain growth-related
investments in plant, facilities or equipment; raising the cap on the amount that the
monthly fixed charge may be increased each year; requiring the state corporation
commission to issue an order not later than 90 days after a utility files a petition to
change the gas system reliability surcharge; amending K.S.A. 66-2202 and 66-2204
and repealing the existing sections.
Be it enacted by the Legislature of the State of Kansas:
Section 1. K.S.A. 66-2202 is hereby amended to read as follows:
66-2202. For the purposes of this act:
(a) "GSRS" means gas system reliability surcharge;
(b) "appropriate pretax revenues" means the revenues necessary to
produce net operating income equal to:
(1) The natural gas public utility's weighted cost of capital last
approved by the commission multiplied by the net original cost of
eligible infrastructure system investments, including recognition of
accumulated deferred income taxes, accumulated depreciation
associated with eligible infrastructure system investments that are
included in a currently effective GSRS;
(2) recover state, federal and local income or excise taxes
applicable to such income; and
(3) recover depreciation expenses;
(c) "commission" means the state corporation commission;
(d) "eligible infrastructure system investments" means natural gas
public utility plant projects that:
(1) Do not increase revenues by directly connecting the
infrastructure investments to new customers;
(2)(1) Are in service and used and required to be used; and
(3)(2) were not included in the natural gas public utility's rate base
in its most recent general rate case;
(e) "natural gas public utility" shall have the same meaning
respectively ascribed thereto by means the same as defined in K.S.A.
66-1,200(a), and amendments thereto;
(f) "natural gas public utility plant projects" consist of the
following:
(1) Mains, meters, valves, service lines, regulator stations, vaults
and other pipeline system components installed to replace, upgrade or
modernize obsolete facilities, including, but not limited to, installation
to comply with state or federal safety requirements or replacing
existing facilities;
(2) main relining projects, service line insertion projects, joint
encapsulation projects and other similar projects extending the useful
life or enhancing the integrity of pipeline system components ,
including, but not limited to, projects undertaken to comply with state
or federal safety requirements;
(3) facility relocations required due to construction or
improvement of a highway, road, street, public way or other public
work by or on behalf of the United States, this state, a political
subdivision of this state or another entity having the power of eminent
domain provided that the costs related to such projects have not been
reimbursed to the natural gas public utility;
(4) system security costs including allocated corporate costs
incurred by a natural gas public utility; and
(5) investments made in accordance with the utility's safety and
risk management programs; and
(6) any other investment in plant, facilities or equipment,
excluding allocated corporate costs;
(g) "GSRS revenues" means revenues produced through a GSRS
exclusive of revenues from all other rates and charges;
(h) "obsolete facility" means a facility that : (1) Is comprised of
materials that are no longer produced or supported by the manufacturer;
(2) that shows signs of physical deterioration; or (3) does not meet
current safety codes or industry standards. "Obsolete facility" includes
the cost-effective replacement of other facilities that are not considered
obsolete when the replacement of such is done in conjunction with the
Sub for HOUSE BILL No. 2435—page 2
replacement of an obsolete facility; and
(i) "system security" shall mean means capital expenditures to
protect a utility's capital assets, including both physical assets and
cyber assets, such as networks, computers, servers, operating systems,
storage, programs and data, from attack, damage or unauthorized use
and access.
Sec. 2. K.S.A. 66-2204 is hereby amended to read as follows: 66-
2204. (a) At the time that When a natural gas public utility files a
petition with the commission seeking to establish or change a GSRS, it
such utility shall:
(1) Submit proposed GSRS rate schedules and its supporting
documentation regarding to support the calculation of the proposed
GSRS with the petition; and shall
(2) serve commission staff and the citizens citizens' utility
ratepayer board with a copy of its the petition, its proposed rate
schedules and its supporting documentation.
(b) (1) When a petition, along with any associated proposed rate
schedules, is filed pursuant to the provisions of K.S.A. 66-2202 through
66-2204, and amendments thereto, the commission shall conduct an
examination of the proposed GSRS;
(2) the staff of the commission shall examine information of the
natural gas public utility to confirm that the underlying costs are in
accordance with the provisions of K.S.A. 66-2202 through 66-2204,
and amendments thereto, and to confirm proper calculation of the
proposed charge. The staff shall submit a report regarding its such
examination to the commission not later than 60 days after the petition
is filed. No other revenue requirement or ratemaking issues may be
examined in consideration of the petition or associated proposed rate
schedules filed pursuant to the provisions of K.S.A. 66-2202 and 66-
2204, and amendments thereto;
(3) the commission may hold a hearing on the petition and any
associated rate schedules and shall issue an order to become effective
not later than 120 90 days after the petition is filed; and
(4) if the commission finds that a petition complies with the
requirements of K.S.A. 66-2202 through 66-2204, and amendments
thereto, the commission shall enter an order authorizing the natural gas
public utility to impose a GSRS that is sufficient to recover appropriate
pretax revenue, as determined by the commission pursuant to the
provisions of K.S.A. 66-2202 through 66-2204, and amendments
thereto.
(c) A natural gas utility may effectuate a change in its rate
pursuant to the provisions of this section no not more often than once
every 12 months calendar year.
(d) In determining the appropriate pretax revenue, the commission
shall consider only the following factors:
(1) The net original cost of eligible infrastructure system
investments. The net original cost shall be defined as the original cost
of eligible infrastructure system investments less associated retirements
of existing infrastructure;
(2) the accumulated deferred income taxes associated with the
eligible infrastructure system investments, as adjusted to comply with
internal revenue service regulations;
(3) the accumulated depreciation associated with the eligible
infrastructure system investments;
(4) the current state, federal and local income tax or excise rates;
(5) the natural gas public utility's actual regulatory capital
structure as determined during the most recent general rate proceeding
of the natural gas public utility;
(6) the actual cost rates for the natural gas public utility's debt and
preferred stock as determined during the most recent general rate
proceeding of the natural gas public utility;
(7) the natural gas public utility's cost of common equity as
determined during the most recent general rate proceeding of the
natural gas public utility;
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(8) the current depreciation rates applicable to the eligible
infrastructure system investments; and
(9) in the event that information pursuant to paragraphs (5), (6)
and (7) are is unavailable and the commission is not provided with such
information on an agreed-upon basis, the commission shall utilize the
average of the recommendations contained in the testimony submitted
by the natural gas public utility and commission staff during the most
recent general rate proceeding of the natural gas public utility to
determine the capital structure, recommended cost rates for debt and
preferred stock and recommended cost of common equity to determine
the average weighted cost of capital.
(e) (1) The monthly GSRS charge shall be allocated among the
natural gas public utility's classes of customers in the same manner as
costs for the same type of facilities was allocated among classes of
customers in the natural gas public utility's most recent general rate
proceeding. If that allocation is not available or determinable, the
commission shall utilize the average of the recommendations contained
in the testimony submitted by the natural gas public utility and the
commission staff regarding class allocation of costs. A GSRS shall be
charged to customers as a monthly fixed charge and not based on
volumetric consumption. Such monthly charge shall not increase more
than $.80 $1.35 per residential customer over the:
(A) Base rates in effect for the initial filing of a GSRS; or
(B) monthly charge established in the most recent filing of a GSRS
for any subsequent filing of a GSRS . Thereafter, each filing shall not
increase the monthly charge more than $.80 per residential customer
over the most recent filing of a GSRS;
(2) At the end of each twelve-month 12-month calendar period
that the GSRS is in effect or in conjunction with a natural gas public
utility's petition to change the GSRS , the natural gas public utility shall
reconcile the differences between the revenues resulting from a GSRS
and the appropriate pretax revenues as found by the commission for
that period and shall submit the reconciliation and a proposed GSRS
adjustment to the commission for approval to recover or refund the
difference, as appropriate, through adjustments of the GSRS charge.
(f) (1) A natural gas public utility that has implemented a GSRS
pursuant to the provisions of K.S.A. 66-2202 through 66-2204, and
amendments thereto, shall file revised rate schedules to reset the GSRS
to zero when new base rates and charges become effective for the
natural gas public utility following a commission order establishing
customer rates in a general rate proceeding that incorporates in the
utility's base rates, subject to subsections (h) and (i), eligible costs
previously reflected in the currently effective GSRS; and
(2) upon the inclusion in a natural gas public utility's base rates
subject to subsections (h) and (i) of eligible costs previously reflected
in a GSRS, the natural gas public utility shall immediately thereafter
reconcile any previously unreconciled GSRS revenues as necessary to
ensure that revenues resulting from the GSRS match as closely as
possible the appropriate pretax revenues as found by the commission
for that period.
(g) A natural gas public utility's filing of a petition or change to a
GSRS pursuant to the provisions of K.S.A. 66-2202 through 66-2204,
and amendments thereto, shall not be deemed to be a rate increase for
purposes of K.S.A. 66-117, and amendments thereto.
(h) Commission approval of a petition, and any associated rate
schedules, to establish or change a GSRS pursuant to the provisions of
K.S.A. 66-2202 through 66-2204, and amendments thereto, shall in no
way be binding upon the commission in determining the ratemaking
treatment to be applied to eligible infrastructure system investments
during a subsequent general rate proceeding when in which the
commission may undertake to review the reasonableness and prudence
of such costs. In the event the commission disallows, during a
subsequent general rate proceeding, recovery of costs associated with
eligible infrastructure system investments previously included in a
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GSRS, the natural gas public utility shall offset its such utility's GSRS
in the future as necessary to recognize and account for any such over
collections.
(i) Nothing in this section shall be construed as limiting the
authority of the commission to review and consider the costs of
infrastructure system investments, along with other costs, during any
general rate proceeding of any natural gas public utility.
Sec. 3. K.S.A. 66-2202 and 66-2204 are hereby repealed.
Sec. 4. This act shall take effect and be in force from and after its
publication in the statute book.
I hereby certify that the above BILL originated in the HOUSE, and passed
that body
Speaker of the House.
Chief Clerk of the House.
Passed the SENATE ______________________________________________________________________________
President of the Senate.
Secretary of the Senate.
APPROVED __________________________________________________________________________________________________
Governor.