by Jennifer Williams

In this hyper-inflationary economy, caused by a multitude of issues, the People are being inundated with the erosion of the value of the dollar, causing an unbearable increase in the cost of living for necessary expenses – like food, housing, supplies, fuel, and now taxes and utilities.

As government municipalities and public utilities are requesting “their share” of increased funding for their services, one must look at the efficiency of these organizations to see exactly how much they’re asking for, what they plan to use it on, and in what areas these organizations should be cutting back in order to relieve the burden on the People.

Throughout the month of August, cities, counties, school boards, and other taxing entities will be holding the required public hearings in order to approve their budget requests to exceed revenue neutral. As for school board budgets, the topic of disproportionate superintendent salaries was already brought to light earlier this year; as was the $15.3 million salary increase requested by the Johnson County Board of County Commissioners. Read the associated links to see how the executive salaries for taxpayer-funded jobs are exceeding the top executive pay of many private business organizations – over $200,000 for Louisburg’s superintendent and over $300,000 for the Johnson County Manager position.

But what about public utilities?
As Evergy is continuing to request increases in rates, is the public aware of how their current budget is being spent? Do they know that the Evergy CEO was compensated over $6.8 MILLION in 2022, Board of Director salaries averaged over $333,000, and stockholders received over $534 MILLION in total dividends paid? Are they aware that executives are rewarded for implementing the global ESG plan, including Evergy’s adherence to the UN 2030 Agenda for Sustainable Development, or that Evergy spends countless hours and dollars in lobbying and campaign donations?

Has the public read Evergy’s company policies that govern their practices? Most likely not.

Below are 5 areas of concern with Evergy’s current business practices that should make anyone, including Kansas legislators, question if the utility monopoly model is still an appropriate method or if it is becoming a method of forcing the public to pay for failing systems that are making executives and investors rich; while leaving the tab with those struggling just to pursue life, liberty, and happiness. Perhaps it is time for another approach to be explored.

This is part 1 of a 5-part Series to address the major concerns in the following categories that are affecting customer rates and the future of our monopolistic public utility.

Hefty Dividend Payments to Shareholders
ESG & “Renewable” Programs
Executive Salaries
Campaign Contributions
KCC and CURB

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Dividends

Is it ethical or even constitutional for a government-mandated-monopoly, that basically forces all customers who want electricity to do business with them, to hand out over 66% of the profits from the customer-paid rates to shareholders who have evident conflicts of interest with the customers?

Sound unbelievable? Customers learned at the recent rate-hike hearings from Evergy that these dividend amounts were accurate. In the company’s 2022 Annual Report, in the opening letter to shareholders, President and CEO, David Campbell, claims:

“In 2022, our adjusted earnings per share were $3.71, up 7 percent over our $3.46 adjusted earnings per share in 2021, and well above our adjusted earnings guidance range of $3.43 to $3.63 per share entering the year. In addition, we increased our quarterly dividend by 7 percent to $0.6125 per share, raising it to $2.45 per share on an annualized basis. The increase is within our targeted dividend-to-earnings payout ratio of 60 percent to 70 percent and consistent with our target of annual growth in adjusted earnings per share of 6 percent to 8 percent.“

Page 172 States that Evergy had 2022 net income of $748,600,000. Instead of reinvesting available funds on the necessary growth, those in charge chose a dividends-to-earnings payout ratio of over 66% based on their adjusted $3.23 earnings per share and their approved $2.45 per share annual dividend.
Cash dividends paid to Evergy shareholders in 2022 were $534,800,000; up from $497,900,000 in 2021 and $465,000,000 in 2020.

If Evergy can afford to pay dividends in an amount well exceeding their recent $218 million requested rate increase, then why didn’t they use the necessary capital from these funds instead of handing them out to investors? It obviously wasn’t an excess available for a dividend payment, if they are immediately claiming they need the money back in the form of rate increases. This shifting of the burden from the public to the benefit of “shareholders” and executives is abhorrent!

Evergy’s 2022 Annual Report on page 36 under Risk Factors states, “In general, utilities are allowed to recover in customer rates costs that were prudently incurred to provide utility service, plus a reasonable return on invested capital. But who defines reasonable?

According to a U.S. News Money Report on dividend payout ratios, “An excessive dividend payout ratio can reflect increased risk, says Ayako Yoshioka, a chartered financial analyst and senior portfolio manager at Wealth Enhancement Group. “A high dividend payout ratio becomes problematic because it implies that a significant portion of net income is being paid out to the shareholder and not retained for reinvestment back into the business,” Yoshioka says.

Isn’t this exactly what we are seeing with Evergy? They are needing to retain money back for reinvestment into the business for infrastructure and to build the necessary supply for Panasonic and other businesses coming into their service area, so why didn’t they use the money they already had instead of returning it to investors and then asking for the public to pay more to build it?

This would never happen in a private enterprise. The business would be expected to fund its growth, and the stockholders would understand that a smaller dividend now is necessary for a larger future return with the increased profits that will be coming in future years after the anticipated growth. That’s how a real business works, unlike a government monopoly that allows a board of 3 members on the Kansas Corporation Commission (KCC) to decide the fate of millions of customers who have no other choice but to pay whatever rate they’re forced to pay.

Evergy understands the unique position they hold as a monopoly, and there are several things disclosed in the opening pages of its annual report that we should consider as consumers and that regulators should consider in order to protect us from the dangers of the monopoly.

As you’ll see throughout this article, everything is directed at shareholders, not customers. It’s not uncommon for businesses to focus on return on investment for shareholders, but are utility companies really in the for-profit business and how much is too much ROI for shareholders?

Who exactly are these shareholders?
84.63% is institutional ownership from global companies like Vanguard Group Inc, Blackrock Inc, State Street Corp, and others shown in the following table (including Bluescape Energy Partners LLC, discussed further below.)

Evergy’s 2023 Annual Meeting and Proxy Statement elaborates on the 2022 Annual Report with additional information. In February 2021, Evergy entered into a securities purchase agreement with an affiliate of Bluescape Energy Partners, LLC to sell 2,269,447 shares of common stock with a warrant to purchase up to 3,950,000 additional shares.

Bluescape’s website claims its duty is to create sustainable success and its mission statement says, “Bluescape believes that considering ESG factors in our opportunities has the potential to not only reduce risk, create shared value, and enhance returns, but also positively impact communities.”

Although this is beginning to transition into topic #2 regarding ESG’s, the below information shows how Evergy is using the argument that stockholder demands are driving their ESG goals (and their wind, solar, and other “renewable” spending.)

Page 10 of the 2022 Annual Report states they are committed to “cleaner, greener solutions” and claims they are “advancing sustainability objectives with ongoing emissions reductions” to help “meet the needs of our many diverse stakeholders.” (complete with a photo of a windmill.)

They even state in their 2022 Annual Report that there is a likely risk that certain stakeholders and lenders could restrict or seek more stringent conditions on Evergy’s investments in certain “carbon-intensive” sectors.

That bears repeating. Evergy’s stakeholders and lenders are so powerful that they could restrict Evergy’s ability to continue providing power using fossil fuels. This explains the many decommissioning efforts of several fossil fuel facilities. The stockholders are in control. They are not only driving the agenda, but they are being compensated with hefty dividends as well.

The fine print of the 2022 Annual Report states Evergy’s concerns about the public’s negative view of their ESG practices, as well as the pressure they are receiving from “activist shareholders and special interest groups” who may disrupt Evergy’s operations with their ESG demands.

“Negative perceptions or publicity from increasing scrutiny of environmental, social and governance practices could also adversely impact Evergy’s stock price. Also, individuals or entities, such as activist shareholders and special interest groups, may seek to influence the Evergy Companies’ strategic plan or take other actions that could disrupt the Evergy Companies’ business, financial results or operations and could adversely impact Evergy’s stock price.”

The push for the Environmental, Social, and Governance policy and the “sustainability” buzzwords for their “renewable” projects are driving the machine and continuing to cost the customers. Why aren’t Kansas legislators stopping this?
Find out more in Part 2 ESG – Environmental, Social, and Governance