Utility commission sides with ratepayers, criticizes hedge fund influence on Evergy
Kansas utility regulators are questioning the motives of an international hedge fund that’s pulling the strings behind Evergy’s plan to spend $10.4 billion on its electrical system that covers most of the state.
Members of the Kansas Corporation Commission sent a strong signal Tuesday that they won’t tolerate efforts to increase shareholder profits at the expense of unreasonably high rates for Evergy’s 1 million Kansas customers.
Commissioners expressed suspicion the spending plan is designed largely to benefit one of Evergy’s major investors, Elliott Management Corp., a hedge fund that bought into Evergy last year with a stated goal of raising the company’s profitability and stock prices.
Commissioner Susan Duffy, formerly the KCC’s executive director, was particularly blunt about Elliott’s role in Evergy.
“When the activist (investment) company Elliott came to this state and to Evergy in particular, to insert themselves into the affairs of the utility, I personally did not think that was a good idea,” Duffy said. “This company has a track record of interference on behalf of the shareholders . . . Let’s be very clear our role here is not to benefit the shareholders. Our role here is to protect the ratepayer.”
KCC Chairman Andrew French expanded on Duffy’s comments.
“I personally don’t think Elliott has ever fully grasped the nature of the companies that it has invested in when it first started entering the arena of public utilities,”he said. “Yes, these are private companies with duties to their investors. But Evergy and other public utilities are also public utilities entrusted with exclusive service territories.”
That means Evergy is entitled to earn a reasonable return for its shareholders, he said, but added “all their activities must be aligned with customer needs.”
At issue is a sustainability transformation plan, or STP, undertaken by Evergy after Elliott came on board. The plan calls for cost reductions on current operations and a large expansion in system investment, both of which would benefit the company’s bottom line and returns for shareholders.
The original plan envisioned $8.9 billion in additional spending on transmission, distribution and renewable energy. In an investor presentation this year, Evergy added a fifth year and an increase in total capital spending to $10.4 billion through 2025.
The commission issued an order Tuesday requiring Evergy to explain and justify that spending plan and report quality of service measures on a quarterly basis.
“Given Evergy’s apparent plans for large future investments, additional transparency is warranted,” the order said. “Accordingly, the Commission directs Evergy to file with its next Capital Plan Report filing an explanation of: (1) the projected increased spending levels, and (2) the impact those spending levels will have on the trajectory of retail rates.”
In a written statement, Evergy said: “The Sustainability Transformation plan was a product of Evergy’s board and management team. Like any strategic plan, to succeed it must serve the best interests of all Evergy stakeholders, including our customers, employees, shareholders and the communities we serve. We are reviewing the commission’s order before identifying if there are appropriate next steps.”
Applauding the commission’s order and attitude is the Citizens’ Utility Ratepayer Board, the small state agency that represents residential and small-business customers.
“The energy burden in Kansas is a real thing,” said David Nickel, CURB executive director. “There are people that can’t afford their electricity. There are people that suffer as to whether they buy their food or buy their medicine, or keep heating their homes or keep their homes air conditioned in the hot summer months.”
The KCC’s action “shows this commission is certainly in touch with the need to be mindful of what rates are going to be,” Nickel said.
The nationwide consumer watchdog group Public Citizen and the Communications Workers of America union recently filed a protest with federal officials alleging that Elliott and an affiliated hedge fund, Bluescape Energy Partners, have virtually taken over Evergy.
“There is substantial evidence that the hedge funds exert controlling influence over Evergy,” said the filing to the Federal Energy Regulatory Commission.
“First, at least four of Evergy’s thirteen board members were selected by the hedge funds — C. John Wilder, Bluescape’s current Executive Chairman; David A.Campbell, former Bluescape President; Paul M. Keglevic; and former (Louisiana) U.S. Senator Mary L. Landrieu,” the filing said. “A fifth individual, Kirkland B. Andrews, was Elliott’s board selection, a position he held until shifting over to become Evergy’s Executive Vice President and Chief Financial Officer.”
The protest alleged that even more than the membership on the board, the hedge funds exert control through a finance committee that was given sweeping powers in February “as the primary driver of management and investment decision making for the entire company.”
“There are five members of the Finance Committee, and all four of the Bluescape and Elliott board members serve on the Committee, with Bluescape’s Wilder serving as Chairman,” the filing said.
The Public Citizen/CWA protest also outlined several other instances around the country where Elliott had intervened in utilities, leading to increased rates for consumers.
This story was originally published November 24, 2021 at 5:00 AM.
