KCC, KGS reach settlement to recover nearly all costs from severe winter weather from transportation customers

Published: Mar. 3, 2022 at 11:33 AM CST
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TOPEKA, Kan. (WIBW) - The Kansas Corporation Commission and Kansas Gas Service have reached a settlement to recover nearly all of the incurred costs from February 2021′s severe winter weather from its transportation customers.

On Thursday, March 3, the Kansas Corporation Commission says it approved a settlement agreement that outlines how Kansas Gas Service will recover costs sustained to meet the demand of its transportation customers during February 2021′s severe winter storm.

Unlike sales customers, who contract directly with KGS for gas, the KCC said transportation customers buy gas from gas producers or through a gas marketer. The purchased gas is then provided to KGS and delivered through its pipelines to transportation customers. Examples include some municipal utilities, businesses, schools and churches.

KCC said what is normally a straightforward transaction was complicated by the high demand and limited supply of gas during the winter storm which knocked the Southern Texas Powergrid offline, disrupting service to millions across the midwest and thousands in Kansas. It said some gas marketers did not provide adequate gas to KGS in order to ensure uninterrupted service to transportation customers - threatening the integrity of the company’s whole system.

Under an emergency order from KCC meant to protect the health and safety of Kansans, it said KGS was required to make up the difference to ensure gas was available to all customers, including transportation customers, as temperatures remained in the negatives for nearly a week.

Under the settlement agreement, KCC said KGS will recover about $52 million of the $58 million in calculated supply shortfalls in the negotiated gas cost penalty payments from marketers and transportation customers.

Due to the extraordinary costs from the winter storm, KCC said KGS also asked for a waiver from a provision in its tariff that would have allowed a multiplier penalty to be applied to the amount owed, which was granted.

In the absence of the waiver, KCC said penalties would have been upwards of $888 million, which would have potentially sent many into bankruptcy and resulted in great harm to the Sunflower State’s economy.

Had KGS been unable to recover costs from marketers and transportation customers, KCC said those costs would have fallen on residential and small commercial customers. It said the settlement also avoids costly litigation and further delays.

KCC said Thursday’s order makes clear the decision to waive penalties is not to be seen as a precedent and not to assume penalties will be waived again if a similar situation occurs in the future.

In addition, the Commission said the order states any proceeds received by KGS from ongoing federal or state investigations into market manipulation, price gouging or civil suits will be passed to customers.

To read the full order, click HERE.

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