Kansas regulator approves securitization for 2021 winter storm costs

Bonds

Another Kansas energy provider received the green light to issue taxable securitized bonds to recover costs incurred during Winter Storm Uri, which hit several states in February 2021, sparking high demand for electricity and natural gas that dramatically increased prices for those commodities.

The Kansas Corporation Commission on Thursday approved a settlement agreement and irrevocable financing order for natural gas distributor Atmos Energy to recover $92.7 million in deferred costs and associated carrying costs.

“The use of lower interest securitized bonds is expected to save ratepayers an estimated $8.5 million compared to recovery through traditional rates,”  the commission said in a statement.

A fierce winter storm that hit several states, including Kansas, in February 2021 led to a blizzard of taxable securitized bonds to recover big costs incurred by gas and electric utilities.

Bloomberg News

Based on interest rate estimates, the bond sale, which could take place in March, would result in a monthly charge of about $5.78 over 10 years compared to about $10.55 per month over five years using traditional ratemaking, the statement added.

The move follows the KCC’s approval in August of a financing order allowing Kansas Gas Service to issue securitized bonds to recover $328 million in costs. Those bonds are expected to price later this year through J.P. Morgan and RBC Capital Markets, according to a KCC spokeswoman.

The Kansas Legislature passed the Utility Financing and Securitization Act last year to allow utilities to use securitized bonds to pay for extraordinary costs.

The Oklahoma Development Finance Authority wrapped up its storm-related securitizations this week with the sale of about $81.56 million of bonds through Citigroup for Summit Utilities Oklahoma.  

The authority previously issued $697 million of bonds for Public Service Company of Oklahoma, $1.35 billion of bonds for Oklahoma Natural Gas Company, and $761.6 million of bonds for Oklahoma Gas and Electric Company.

The Texas Natural Gas Securitization Finance Corporation could issue $3.4 billion of customer rate relief bonds on behalf of eight natural gas utility local distribution companies as soon as Nov. 9 in a deal led by Jefferies.

The Texas Legislature passed a series of bills in response to the storm. For natural gas providers, House Bill 1520 authorized securitization financing to provide customers with rate relief by extending the period over which they will pay the extraordinarily high gas costs.

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