## Facts

- Kansas electric utilities traditionally used a two-part residential rate: a flat monthly service charge plus a variable energy charge based on kilowatt-hours used.
- Utilities incur fixed costs (including capital investment and infrastructure) regardless of monthly energy usage, but historically placed some fixed costs into the variable per-kWh charge in part to encourage lower consumption.
- As more customers began using distributed generation (DG), such as rooftop solar, those customers bought fewer kilowatt-hours from the utility while still relying on the grid for service.
- Westar Energy, Inc., and Kansas Gas and Electric Company asserted this created a “free-rider” cost shift: DG customers contributed less through volumetric charges toward fixed system costs, increasing the amount recovered from non-DG customers.
- In a rate case before the Kansas Corporation Commission (KCC), the utilities sought approval of a new residential DG rate schedule (RS-DG) that added a flat monthly “demand charge” to DG customers—about $3 in winter and $9 in summer—on top of the existing two-part structure.
- The KCC approved the RS-DG rate design over objections from renewable-energy and consumer advocates.
- The challengers argued the RS-DG tariff violated K.S.A. 66-117d, which bars utilities from charging higher rates or otherwise disadvantaging customers because they use renewable energy.
- The utilities acknowledged the RS-DG design caused DG customers to pay more than other residential customers for the same service, but argued K.S.A. 66-1265(e) (enacted later) authorized DG-specific rate structures and displaced 66-117d to the extent of any conflict.
- The Kansas Court of Appeals affirmed the KCC, and the Kansas Supreme Court granted review.

## Issues

1. Does a residential DG-specific rate schedule that results in DG customers paying more than non-DG customers for the same electric service violate K.S.A. 66-117d’s prohibition on disadvantaging customers because of renewable-energy use?
2. If the rate violates K.S.A. 66-117d, did K.S.A. 66-1265(e) impliedly repeal or supersede 66-117d by authorizing separate rate structures for certain DG customers?
3. What role, if any, does deference to the KCC play when the dispute turns on interpretation of these statutes?

## Decision

- The Kansas Supreme Court held the RS-DG rate design violated K.S.A. 66-117d because it discriminated against residential DG customers by charging them more than other residential customers for the same service based on their use of renewable-energy generation.
- The court rejected the utilities’ and KCC’s argument that K.S.A. 66-1265(e) impliedly repealed or displaced K.S.A. 66-117d, finding no clear legislative intent or unavoidable conflict.
- The court explained that K.S.A. 66-1265(e) permits utilities to propose separate DG rate structures, but it does not authorize higher charges that conflict with 66-117d’s anti-discrimination rule.
- The court reversed the Court of Appeals’ decision upholding the KCC order insofar as it approved the RS-DG tariff.

## Legal Principles

- K.S.A. 66-117d prohibits an electric utility from charging higher rates or otherwise disadvantaging customers on the basis of the customer’s use of renewable energy.
- A rate design that places renewable-using customers into a separate class and results in those customers paying more than similarly situated customers for the same service falls within 66-117d’s bar.
- Implied repeal of an earlier statute by a later statute is disfavored; it requires clear legislative intent or a conflict that cannot be reconciled through harmonized reading.
- K.S.A. 66-1265(e) authorizes utilities to propose a separate rate structure for certain net-metered or DG customers, but that permission does not cancel other statutory limits on discriminatory pricing.
- Statutory interpretation is ultimately for the courts; an agency’s construction does not control when it conflicts with statutory text and standard canons of construction.

## Conclusion

Matter of Westar Energy, Inc. held that the KCC could not approve a DG-specific demand charge that caused DG customers to pay more for the same residential electric service because such a rate disadvantages customers based on renewable-energy use in violation of K.S.A. 66-117d, and the court further held that K.S.A. 66-1265(e) did not impliedly repeal or supersede that anti-discrimination statute.


Matter of Westar Energy, Inc., 460 P.3d 821 (2020)