TOPEKA — Opponents to two new natural gas plants proposed by Evergy testified Wednesday about uncertain costs of natural gas and pushed the Kansas Corporation Commission to consider other options for expanding power generation in the state.
During the third day of KCC hearings, Nick Jones, a senior analyst at New Energy Economics, told commissioners he had the “dubious distinction” of being the only person in the room to have worked as a natural gas forecaster.
“I’m familiar with some of the pitfalls and some of the risks in trying to forecast natural gas that far in advance,” he said, referring to projected costs that will be incurred for Evergy natural gas plants expected to go into service in 2029 and 2030.
Jones said the U.S. Energy Information Administration has “substantially” revised its forecast for natural gas prices expected in the 2030s in its most recent energy outlook report.
“It’s now significantly above the mid-case (price) that Evergy has proposed in this docket,” he said, referring to low, mid- and high-case projections made by Evergy for natural gas costs.
Supporting his concerns, Jones said, a survey by the Federal Reserve Bank of Kansas City of leading energy producers also predicted increases in natural gas costs in the coming years.
“Now all of these are just data points. I don’t think any of those are definitive, but I do see that the early signals indicate that there is upside risk in the natural gas market, and that the commission should take seriously the potential that these plants could be operating in a scenario closer to the high gas scenario that Evergy modeled, and potentially even beyond that,” Jones said.
Natural gas volatility
In written, prefiled testimony, Jones said Evergy failed to account for natural gas price volatility in its supply plan, which showed purchasing natural gas in a manner similar to purchasing coal.
“Natural gas cannot be easily stockpiled on site, as is common practice for coal,” Jones’ written testimony said. “Nor can natural gas be delivered through multiple modes of transport, as can be done for coal. Nor is natural gas marketed almost exclusively to the power sector, as is the case for thermal coal. In contrast to coal markets, natural gas markets rely on centralized storage and delivery to end-users via pipelines.”
Those and other factors Jones listed in testimony mean natural gas is a “just-in-time” fuel for which the timing and volume of deliveries must coincide exactly with the needs of the power plant.
“Therefore, procuring natural gas inherently requires more sophisticated methods and leaves less room for error than procuring coal,” he said during Wednesday’s hearing.
Jones primarily focused on the need for more diversification in Evergy’s portfolio than what the natural gas plants would add, and he questioned whether commissioners should approve the second natural gas plant at this time.
“I’m not, you know, going to sit here and claim that batteries are a one-to-one swap for natural gas or that there’s some kind of panacea,” he said. “All these options have advantages and drawbacks, but one thing that we can say for sure is that the more diversity that there is in Evergy’s expansion plans, the less that they will be exposed to any particular risk, and that includes the risk of high natural gas prices.”
Outdated model
The second and final witness Wednesday was Lucy Metz, an associate with Synapse Energy Economics testifying for the Citizens Utility Ratepayer Board. On Tuesday, KCC’s Justin Grady, deputy director of utilities, criticized Metz’s focus on adding battery storage, saying it did not mesh with the Integrated Resource Plan that Every is required to file. The IRP lays out the company’s projections for market needs and how it will meet them.
“Market conditions have changed significantly since Evergy developed that 2024 IRP preferred portfolio, and in particular, the relative cost of different replacement resources has changed significantly,” Metz said Wednesday. “It no longer makes sense under these new and current conditions we face for Evergy to forge ahead with that outdated preferred portfolio, which may no longer represent the most cost effective and the lowest risk option for ratepayers.”
Metz said that Evergy did offer updated modeling for the current docket, addressing some of those concerns, but she still felt it did not adequately address market changes.
“I have a number of concerns with this updated modeling, including that Evergy did not account for the future risk of operational restrictions on the combined cycle units from environmental regulations,” she said.
Metz questioned whether Evergy considered the “full range” of resource options before moving forward with proposals for the natural gas plants. She listed converting more of its coal units to gas, for example, to give the company additional time before adding a large resource addition like the proposed plants.
“I believe that if Evergy had corrected these shortcomings, it’s very likely that the model would no longer have selected that 2030 (combined cycle natural gas plant) and would have gone with some of those other alternatives instead,” she said. “And I really sympathize with staff’s instinct in this time of uncertainty related to political headwinds and tariffs and trade wars to lock in this generation. But I just think that perspective really ignores some other categories of risk that ratepayers will be very exposed to.”
Addressing uncertainty
Given the current tariff and generally uncertain environment, Metz said, she believes one of the best ways to protect ratepayers would be to select a portfolio that will “be robust across that uncertainty, no matter how things turn out with the tariffs.”
“So it’s really not clear at this moment what the net effect across all the different energy supply chains will be of these tariffs threats, but if Evergy builds the combined cycle units, it will be locking repairs into these very large assets that will then rely on gas over their entire lifetime, and the tariffs could affect gas prices as well,” she said. “Whereas more modular and incremental resource additions, such as batteries or solar energy, can really adapt as it goes, and while tariffs may affect capital costs of these resources, once they’re built, they will have no fuel costs, and so rate payers will no longer be exposed to that uncertainty.”
The predetermination hearing ended after Metz’s testimony. Commissioner Andrew French said the KCC would reach its decision by July 7.
Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.
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