By Tom Kleckner

FERC last week found that KCP&L Greater Missouri Operations’ proposed payment of dividends complies with the Federal Power Act (EL18-146).

The commission found that Greater Missouri had clearly identified the source of its proposed dividends and that “nothing in the record indicates that the dividends will be excessive.” FERC found that the dividends would be “generally consistent with the amount and timing of the dividends” the utility has traditionally paid to its parent Great Plains Energy.

The commission said that, “consistent with prior precedent,” the issuance of dividends would not harm GPE. It conditioned its approval on the utility’s compliance with its capitalization and credit rating commitments.

Greater Missouri filed the petition in May, saying it had deferred income tax assets and liabilities related to its regulated operations and significant deferred income tax assets for net operating losses (NOLs) generated prior to it’s acquisition by GPE in 2008. The utility said last year’s Tax Cuts and Jobs Act required it to revalue all of its deferred tax assets and liabilities in December based on the lower 21% corporate tax rate, and to revise its assumptions regarding the use of certain tax credits and NOLs.

The utility recognized a $111.6 million one-time, non-cash charge to income tax expense, approximately 1.6 times its average net income from 2014 through 2016 ($71.4 million). The charge caused Greater Missouri to have an accumulated deficit in its retained earnings account, which, according to FPA Section 305a, restricted the utility’s ability to pay dividends to GPE.

Section 305a forbids any public utility’s officer or director to receive “for his own benefit” any security issued or to share in any of the proceeds from any funds properly included in the capital account. The commission said a key concern was “corporate officials raiding corporate coffers for their personal financial benefit.”

FERC used a three-factor analysis to determine whether the proposed dividends payment violated the FPA. The commission considered whether: (1) the utility clearly identified the dividends’ sources; (2) the dividends would be excessive; and (3) the proposed dividends would have an adverse effect on the value of shareholders’ interests.

GPE recently acquired Kansas-based Westar Energy. (See Westar-Great Plains Merger Wins Final Approval.)