February's extreme cold weather event puts added stress on Kansas' state budget
Many municipalities were in danger of financial ruin from sky-high natural gas bills after extreme cold temperatures swept through Kansas in February and caused rolling blackouts.
The high prices were caused by the unprecedented demand for energy during the freezing weather, combined with the limited supply due to the freeze taking down critical energy infrastructure.
State government itself also wasn't spared, as the governor's office early last week requested lawmakers go through the state budget to find money for higher energy costs it faced.
"We're spending a lot of dollars out of state general funds here on an emergency situation," said Rep. Sean Tarwater, R-Stillwell.
Overall, Kansas might have to spend almost $2.5 million extra to make up for the higher bills.
While the amount is small relative to Kansas' $20 billion budget, every dollar matters. The state's coffers can still face uncertainty from the economic impacts of COVID-19, and GOP lawmakers are looking to override a veto on $284 million in tax cuts over three years.
Agencies saw dramatic spike in energy bills
Many of the increased energy bills were much, much higher than expected. The Kansas Highway Patrol had expected February and March bills to total $2,600. Instead, the agency saw bills totaling $47,435.
"They cannot handle that within existing resources that was far and away above what their budget would have been," said Adam Proffitt, director of the state's budget division.
KHP is requesting that difference from the Kansas Highway Patrol Operations Fund.
The Kansas Department of Corrections is requesting $1.37 million from the general fund for increased energy bills for four correctional facilities in Ellsworth, El Dorado, Hutchinson and Topeka. Their February energy bills were only expected to cost $83,611.
Four state hospitals face the same situation, having to pay more than $1 million combined when they only expected to be charged $92,000 for February.
And the Kansas adjutant general only expected to pay $31,818 for energy usage that month. Now, it will have to pay $668,000, but just $179,500 is being requested from state funding while the rest will be from federal sources.
Paying off all those extra costs now, instead of spreading them out over time, is the fiscally responsible thing to do, said Proffitt on behalf of the governor's requests.
"It's not 0% interest. It's effectively putting it on a credit card and paying it over time," he said of the idea of spreading the costs. "So essentially, it's more fiscally responsible for us to just get this paid off and be done with it, especially in light of the new revenue estimates."
That's referring to the fact state revenue expectations have significantly improved to pre-pandemic levels.
Quite a few state lawmakers questioned who the gas suppliers were and whether there would be some plan to change future supplier contracts. The idea of having long-term gas contracts was brought up.
"It seems like we ought to look into locking down contracts for a reasonable price, so we don't get into that kind of a spike in the future," said Sen. Tom Hawk, D-Manhattan. "And my guess is we didn't do that because natural gas prices had gone down substantially over the years and seemed to stay at a pretty level rate.
"But I'd certainly hate to be in this situation again, if we could avoid it."
Lawmakers question use of nonregulated utilities
Other lawmakers questioned why such drastic price increases happened in the first place.
Utilities regulated by the state shouldn't have increased energy bills and have to work out with regulators a plan to spread the extra costs over time. Non-regulated utilities, like those in winter storm disaster down in Texas, don't have those consumer protections in place and are able to charge whatever was the market level price.
"If you look at like some of the state hospitals or prisons that are around some of the border areas, they could be getting their natural gas out of Oklahoma ... a little bit out of Texas," said Proffitt, who confirmed not all Kansas state government entities are using regulated utilities.
"How come if they're all state agencies, why aren't we all using the same entity, regulated company?" asked Sen. Carolyn McGinn, R-Sedgwick. "It seems like it should be more uniform."
Sen. J.R. Claeys, R-Salina, reaffirmed that sentiment, and noted that around four years ago, there was legislation that would have standardized situations like this.
"We're kind of seeing that now that by having the hodgepodge, you're getting different results across the state," he said, adding that uniformity could have given Kansas statewide purchasing power to obtain lower prices.
Regardless of whatever solution is out there, the fact remains that the state has to pay those prices sooner or later.
Additionally, Kansas will also have to fund the administration of its loan program it created to help cities pay off their sky-high natural gas bills. Meanwhile, utilities are still in the process with regulators to figure out how to pay off those increased energy costs.