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Evergy Metro

Filed: 4 Nov 20, 7:00pm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______to_______
evrg-20200930_g1.jpg
 Exact name of registrant as specified in its charter, 
Commissionstate of incorporation, address of principalI.R.S. Employer
File Numberexecutive offices and telephone numberIdentification Number
   
001-38515EVERGY, INC.82-2733395
(a Missouri corporation)
1200 Main Street
Kansas City, Missouri 64105
(816) 556-2200
  
001-03523EVERGY KANSAS CENTRAL, INC.48-0290150
(a Kansas corporation)
818 South Kansas Avenue
Topeka, Kansas 66612
(785) 575-6300
000-51873EVERGY METRO, INC.44-0308720
(a Missouri corporation)
1200 Main Street
Kansas City, Missouri 64105
(816) 556-2200
      Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Evergy, Inc. common stockEVRGNew York Stock Exchange


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Evergy, Inc.YesxNo
Evergy Kansas Central, Inc.YesxNo
Evergy Metro, Inc.YesxNo
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Evergy, Inc.YesxNo
Evergy Kansas Central, Inc.YesxNo
Evergy Metro, Inc.YesxNo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Evergy, Inc.Large Accelerated FilerxAccelerated FilerNon-accelerated FilerSmaller Reporting CompanyEmerging Growth Company
Evergy Kansas Central, Inc.Large Accelerated FilerAccelerated FilerNon-accelerated FilerxSmaller Reporting CompanyEmerging Growth Company
Evergy Metro, Inc.Large Accelerated FilerAccelerated FilerNon-accelerated FilerxSmaller Reporting CompanyEmerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.
Evergy, Inc.
Evergy Kansas Central, Inc.
Evergy Metro, Inc.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Evergy, Inc.YesNox
Evergy Kansas Central, Inc.YesNox
Evergy Metro, Inc.YesNox
On October 30, 2020, Evergy, Inc. had 226,831,800 shares of common stock outstanding.  On October 30, 2020, Evergy Metro, Inc. and Evergy Kansas Central, Inc. each had 1 share of common stock outstanding and held by Evergy, Inc.
Evergy Kansas Central, Inc. and Evergy Metro, Inc. meet the conditions set forth in General Instruction (H)(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format.
This combined Quarterly Report on Form 10-Q is provided by the following registrants: Evergy, Inc. (Evergy), Evergy Kansas Central, Inc. (Evergy Kansas Central) and Evergy Metro, Inc. (Evergy Metro) (collectively, the Evergy Companies). Information relating to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.
This report should be read in its entirety.  No one section of the report deals with all aspects of the subject matter.  It should be read in conjunction with the consolidated financial statements and related notes and with the management's discussion and analysis of financial condition and results of operations included in the 2019 Form 10-K for each of Evergy, Evergy Kansas Central and Evergy Metro.


TABLE OF CONTENTS
Page Number
Item 1.
Note 1:
Note 2:
Note 3:
Note 4:
Note 5:
Note 6:
Note 7:
Note 8:
Note 9:
Note 10:
Note 11:
Note 12:
Note 13:
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
3

CAUTIONARY STATEMENTS REGARDING CERTAIN FORWARD-LOOKING INFORMATION
Statements made in this report that are not based on historical facts are forward-looking, may involve risks and uncertainties, and are intended to be as of the date when made. Forward-looking statements include, but are not limited to, statements relating to our strategic plan, including, without limitation, those related to earnings per share, dividend, operating and maintenance expense and capital investment goals; the outcome of legislative efforts and regulatory and legal proceedings; future energy demand; future power prices; plans with respect to existing and potential future generation resources; the availability and cost of generation resources and energy storage; target emissions reductions; and other matters relating to expected financial performance or affecting future operations. Forward-looking statements are often accompanied by forward-looking words such as "anticipates," "believes," "expects," "estimates," "forecasts," "should," "could," "may," "seeks," "intends," "proposed," "projects," "planned," "target," "outlook," "remain confident," "goal," "will" or other words of similar meaning. Forward-looking statements involve risks, uncertainties and other factors that could cause actual results to differ materially from the forward-looking information.
In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, the Evergy Companies are providing a number of risks, uncertainties and other factors that could cause actual results to differ from the forward-looking information. These risks, uncertainties and other factors include, but are not limited to: economic and weather conditions and any impact on sales, prices and costs; changes in business strategy or operations; the impact of federal, state and local political, legislative, judicial and regulatory actions or developments, including deregulation, re-regulation, securitization and restructuring of the electric utility industry; decisions of regulators regarding, among other things, customer rates and the prudency of operational decisions such as capital expenditures and asset retirements; changes in applicable laws, regulations, rules, principles or practices, or the interpretations thereof, governing tax, accounting and environmental matters, including air and water quality and waste management and disposal; the impact of climate change, including increased frequency and severity of significant weather events and the extent to which counterparties are willing to do business with, finance the operations of or purchase energy from the Evergy Companies due to the fact that the Evergy Companies operate coal-fired generation; prices and availability of electricity in wholesale markets; market perception of the energy industry and the Evergy Companies; the impact of the Coronavirus (COVID-19) pandemic on, among other things, sales, results of operations, financial condition, liquidity and cash flows, and also on operational issues, such as the availability and ability of our employees and suppliers to perform the functions that are necessary to operate the Evergy Companies; changes in the energy trading markets in which the Evergy Companies participate, including retroactive repricing of transactions by regional transmission organizations (RTO) and independent system operators; financial market conditions and performance, including changes in interest rates and credit spreads and in availability and cost of capital and the effects on derivatives and hedges, nuclear decommissioning trust and pension plan assets and costs; impairments of long-lived assets or goodwill; credit ratings; inflation rates; the transition to a replacement for the London Interbank Offered Rate (LIBOR) benchmark interest rate; effectiveness of risk management policies and procedures and the ability of counterparties to satisfy their contractual commitments; impact of terrorist acts, including cyber terrorism; ability to carry out marketing and sales plans; cost, availability, quality and timely provision of equipment, supplies, labor and fuel; ability to achieve generation goals and the occurrence and duration of planned and unplanned generation outages; delays and cost increases of generation, transmission, distribution or other projects; the Evergy Companies' ability to manage their transmission and distribution development plans and transmission joint ventures; the inherent risks associated with the ownership and operation of a nuclear facility, including environmental, health, safety, regulatory and financial risks; workforce risks, including those related to increased costs of, or changes in, retirement, health care and other benefits; disruption, costs and uncertainties caused by or related to the actions of individuals or entities, such as activist shareholders or special interest groups, that seek to influence our strategic plan, financial results or operations; the possibility that strategic initiatives, including mergers, acquisitions and divestitures, and long-term financial plans, may not create the value that they are expected to achieve in a timely manner or at all; difficulties in maintaining relationships with customers, employees, regulators or suppliers; and other risks and uncertainties.
This list of factors is not all-inclusive because it is not possible to predict all factors. Additional risks and uncertainties are discussed from time to time in current, quarterly and annual reports filed by the Evergy Companies with the Securities and Exchange Commission (SEC). Reports filed by the Evergy Companies with the SEC should
4

also be read for more information regarding risk factors. Each forward-looking statement speaks only as of the date of the particular statement. The Evergy Companies undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
AVAILABLE INFORMATION
The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at sec.gov. Additionally, information about the Evergy Companies, including their combined annual reports on Form 10-K, combined quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed with the SEC, is also available through the Evergy Companies' website, www.evergy.com. Such reports are accessible at no charge and are made available as soon as reasonably practical after such material is filed with or furnished to the SEC.
Investors should note that the Evergy Companies announce material financial information in SEC filings, press releases and public conference calls. In accordance with SEC guidelines, the Evergy Companies also use the Investor Relations tab on their website, www.evergy.com, to communicate with investors. It is possible that the financial and other information posted there could be deemed to be material information. The information on Evergy's website is not part of this document.
5

GLOSSARY OF TERMS 
The following is a glossary of frequently used abbreviations or acronyms that are found throughout this report.
Abbreviation or AcronymDefinition
  
AAOAccounting authority order
ACEAffordable Clean Energy
AEPAmerican Electric Power Company, Inc.
AFUDCAllowance for funds used during construction
AMTAlternative Minimum Tax
AROsAsset retirement obligations
BSERBest system of emission reduction
CAAClean Air Act Amendments of 1990
CCRsCoal combustion residuals
CO2
Carbon dioxide
COLICorporate-owned life insurance
COVID-19Coronavirus
CPPClean Power Plan
CWAClean Water Act
DOEDepartment of Energy
ELGEffluent limitations guidelines
EPAEnvironmental Protection Agency
EPSEarnings per common share
ERISAEmployee Retirement Income Security Act of 1974, as amended
ERSPEarnings Review and Sharing Plan
EvergyEvergy, Inc. and its consolidated subsidiaries
Evergy BoardEvergy Board of Directors
Evergy CompaniesEvergy, Evergy Kansas Central, and Evergy Metro, collectively, which are individual registrants within the Evergy consolidated group
Evergy Kansas CentralEvergy Kansas Central, Inc., a wholly-owned subsidiary of Evergy, and its consolidated subsidiaries
Evergy Kansas SouthEvergy Kansas South, Inc., a wholly-owned subsidiary of Evergy Kansas Central
Evergy MetroEvergy Metro, Inc., a wholly-owned subsidiary of Evergy, and its consolidated subsidiaries
Evergy Missouri WestEvergy Missouri West, Inc., a wholly-owned subsidiary of Evergy
Evergy Transmission CompanyEvergy Transmission Company, LLC
Exchange ActThe Securities Exchange Act of 1934, as amended
FASBFinancial Accounting Standards Board
FERCFederal Energy Regulatory Commission
FMBsFirst Mortgage Bonds
GAAPGenerally Accepted Accounting Principles
GHGGreenhouse gas
Great Plains EnergyGreat Plains Energy Incorporated
JECJeffrey Energy Center
KCCState Corporation Commission of the State of Kansas
kVKilovolt
6

Abbreviation or AcronymDefinition
kWhKilowatt hour
MDNRMissouri Department of Natural Resources
MECGMidwest Energy Consumers Group
MEEIAMissouri Energy Efficiency Investment Act
MPSCPublic Service Commission of the State of Missouri
MWMegawatt
MWhMegawatt hour
NAAQSNational Ambient Air Quality Standards
NAVNet asset value
NOLNet operating loss
NRCNuclear Regulatory Commission
NSRNew source review
OCIOther comprehensive income
OPCOffice of the Public Counsel
Prairie WindPrairie Wind Transmission, LLC, 50% owned by Evergy Kansas Central
RSURestricted share unit
RTORegional transmission organization
SECSecurities and Exchange Commission
SPPSouthwest Power Pool, Inc.
TDCTransmission delivery charge
TFRTransmission formula rate
TransourceTransource Energy, LLC and its subsidiaries, 13.5% owned by Evergy Transmission Company
VIEVariable interest entity
Wolf CreekWolf Creek Generating Station
7

PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

EVERGY, INC.
Consolidated Balance Sheets
(Unaudited)
September 30December 31
 20202019
ASSETS(millions, except share amounts)
CURRENT ASSETS: 
Cash and cash equivalents$361.6 $23.2 
Receivables, net of allowance for credit losses of $15.2 and $10.5, respectively318.5 228.5 
Accounts receivable pledged as collateral395.0 339.0 
Fuel inventory and supplies512.1 481.6 
Income taxes receivable53.9 85.5 
Regulatory assets205.9 231.7 
Prepaid expenses and other assets67.7 78.2 
Total Current Assets1,914.7 1,467.7 
PROPERTY, PLANT AND EQUIPMENT, NET19,624.1 19,184.4 
PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET156.7 162.0 
OTHER ASSETS:  
Regulatory assets1,734.1 1,740.5 
Nuclear decommissioning trust fund587.5 573.2 
Goodwill2,336.6 2,336.6 
Other527.5 511.5 
Total Other Assets5,185.7 5,161.8 
TOTAL ASSETS$26,881.2 $25,975.9 
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
8

EVERGY, INC.
Consolidated Balance Sheets
(Unaudited)
September 30December 31
 20202019
LIABILITIES AND EQUITY(millions, except share amounts)
CURRENT LIABILITIES:  
Current maturities of long-term debt$353.5 $251.1 
Current maturities of long-term debt of variable interest entities18.8 32.3 
Notes payable and commercial paper200.0 561.9 
Collateralized note payable395.0 339.0 
Accounts payable358.9 528.8 
Accrued taxes305.8 145.1 
Accrued interest118.6 122.3 
Regulatory liabilities35.1 63.3 
Asset retirement obligations66.5 71.3 
Accrued compensation and benefits69.9 59.2 
Other176.1 161.6 
Total Current Liabilities2,098.2 2,335.9 
LONG-TERM LIABILITIES:  
Long-term debt, net9,276.4 8,746.7 
Long-term debt of variable interest entities, net0 18.8 
Deferred income taxes1,682.9 1,744.4 
Unamortized investment tax credits188.3 375.4 
Regulatory liabilities2,589.8 2,248.3 
Pension and post-retirement liability1,047.8 1,017.6 
Asset retirement obligations882.3 602.8 
Other331.3 340.7 
Total Long-Term Liabilities15,998.8 15,094.7 
Commitments and Contingencies (Note 11)
EQUITY:
Evergy, Inc. Shareholders' Equity:
Common stock - 600,000,000 shares authorized, without par value
226,832,410 and 226,641,443 shares issued, stated value
7,077.0 7,070.4 
Retained earnings1,773.5 1,551.5 
Accumulated other comprehensive loss(48.4)(50.0)
Total Evergy, Inc. Shareholders' Equity8,802.1 8,571.9 
Noncontrolling Interests(17.9)(26.6)
Total Equity8,784.2 8,545.3 
TOTAL LIABILITIES AND EQUITY$26,881.2 $25,975.9 
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
9

EVERGY, INC.
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
(millions, except per share amounts)
OPERATING REVENUES$1,517.6 $1,577.6 $3,819.0 $4,016.2 
OPERATING EXPENSES:
Fuel and purchased power316.2 357.3 832.5 978.9 
SPP network transmission costs66.1 62.4 197.8 188.7 
Operating and maintenance304.6 311.6 865.5 907.1 
Depreciation and amortization218.0 216.1 658.1 645.1 
Taxes other than income tax91.0 91.5 274.2 276.4 
Total Operating Expenses995.9 1,038.9 2,828.1 2,996.2 
INCOME FROM OPERATIONS521.7 538.7 990.9 1,020.0 
OTHER INCOME (EXPENSE):
Investment earnings1.7 1.8 4.0 7.6 
Other income7.1 2.8 17.0 17.1 
Other expense(20.1)(19.7)(57.7)(57.2)
Total Other Expense, Net(11.3)(15.1)(36.7)(32.5)
Interest expense94.8 90.8 290.5 277.3 
INCOME BEFORE INCOME TAXES415.6 432.8 663.7 710.2 
Income tax expense50.0 65.5 93.8 99.2 
Equity in earnings of equity method investees, net of income taxes1.9 3.6 6.1 7.9 
NET INCOME367.5 370.9 576.0 618.9 
Less: Net income attributable to noncontrolling interests3.0 4.1 8.7 12.9 
NET INCOME ATTRIBUTABLE TO EVERGY, INC.$364.5 $366.8 $567.3 $606.0 
BASIC AND DILUTED EARNINGS PER AVERAGE COMMON SHARE OUTSTANDING ATTRIBUTABLE TO EVERGY, INC. (see Note 1)
Basic earnings per common share$1.60 $1.56 $2.50 $2.49 
Diluted earnings per common share$1.60 $1.56 $2.49 $2.49 
AVERAGE COMMON SHARES OUTSTANDING
Basic227.3 234.6 227.2 243.5 
Diluted227.5 235.0 227.5 243.8 
COMPREHENSIVE INCOME
NET INCOME$367.5 $370.9 $576.0 $618.9 
Derivative hedging activity
Loss on derivative hedging instruments0 (29.4)0 (64.4)
Income tax benefit0 7.5 0 16.5 
Net loss on derivative hedging instruments0 (21.9)0 (47.9)
Reclassification to expenses, net of tax1.4 0.2 1.7 0.2 
Derivative hedging activity, net of tax1.4 (21.7)1.7 (47.7)
Defined benefit pension plans
Amortization of net losses included in net periodic benefit costs, net of tax0 (0.1)
Change in unrecognized pension expense, net of tax0 0 (0.1)0 
Total other comprehensive income (loss)1.4 (21.7)1.6 (47.7)
COMPREHENSIVE INCOME368.9 349.2 577.6 571.2 
Less:  comprehensive income attributable to noncontrolling interest3.0 4.1 8.7 12.9 
COMPREHENSIVE INCOME ATTRIBUTABLE TO EVERGY, INC.$365.9 $345.1 $568.9 $558.3 
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
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EVERGY, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Year to Date September 3020202019
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:(millions)
Net income$576.0 $618.9 
Adjustments to reconcile income to net cash from operating activities:
Depreciation and amortization658.1 645.1 
Amortization of nuclear fuel43.8 42.6 
Amortization of deferred refueling outage19.1 19.4 
Amortization of corporate-owned life insurance14.8 16.5 
Non-cash compensation12.1 12.9 
Net deferred income taxes and credits136.5 111.4 
Allowance for equity funds used during construction(9.9)(0.9)
Payments for asset retirement obligations(11.0)(11.6)
Equity in earnings of equity method investees, net of income taxes(6.1)(7.9)
Income from corporate-owned life insurance(6.8)(19.5)
Other0.7 (3.6)
Changes in working capital items:
Accounts receivable(68.6)(68.4)
Accounts receivable pledged as collateral(56.0)(30.0)
Fuel inventory and supplies(30.0)57.0 
Prepaid expenses and other current assets20.9 65.7 
Accounts payable(87.5)(111.5)
Accrued taxes192.3 155.3 
Other current liabilities(43.9)(77.7)
Changes in other assets88.4 56.1 
Changes in other liabilities(21.2)(22.5)
Cash Flows from Operating Activities1,421.7 1,447.3 
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:  
Additions to property, plant and equipment(1,058.1)(849.1)
Purchase of securities - trusts(50.3)(37.4)
Sale of securities - trusts44.2 32.3 
Investment in corporate-owned life insurance(16.4)(17.2)
Proceeds from investment in corporate-owned life insurance60.6 99.1 
Other investing activities(9.9)0.2 
Cash Flows used in Investing Activities(1,029.9)(772.1)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:  
Short-term debt, net(361.9)(378.0)
Proceeds from term loan facility0 1,000.0 
Repayment of term loan facility0 (1,000.0)
Collateralized short-term borrowings, net56.0 30.0 
Proceeds from long-term debt889.3 2,374.0 
Retirements of long-term debt(251.1)(701.1)
Retirements of long-term debt of variable interest entities(32.3)(30.3)
Payment for settlement of interest rate swap accounted for as a cash flow hedge0 (69.8)
Borrowings against cash surrender value of corporate-owned life insurance54.5 57.2 
Repayment of borrowings against cash surrender value of corporate-owned life insurance(52.5)(77.4)
Cash dividends paid(343.6)(347.5)
Repurchase of common stock under repurchase plan0 (1,628.7)
Distributions to shareholders of noncontrolling interests0 (8.5)
Other financing activities(11.8)(5.3)
Cash Flows used in Financing Activities(53.4)(785.4)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH338.4 (110.2)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period23.2 160.3 
End of period$361.6 $50.1 
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
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EVERGY, INC.
Consolidated Statements of Changes in Equity
(Unaudited)
Evergy, Inc. Shareholders
Common stock sharesCommon stockRetained earningsAOCINon-controlling interestsTotal equity
(millions, except share amounts)
Balance as of December 31, 2018255,326,252 $8,685.2 $1,346.0 $(3.0)$(37.5)$9,990.7 
Net income— — 99.5 — 3.9 103.4 
Issuance of stock compensation and reinvested dividends, net of tax withholding60,594 (1.6)— — — (1.6)
Dividends declared on common stock ($0.475 per share)— — (119.8)— — (119.8)
Stock compensation expense— 5.4 — — — 5.4 
Repurchase of common stock under repurchase plan(10,548,060)(578.3)— — — (578.3)
Consolidation of noncontrolling interests— — — — 3.8 3.8 
Distributions to shareholders of noncontrolling interests— — — — (1.4)(1.4)
Derivative hedging activity, net of tax— — — (10.2)— (10.2)
Other— (0.3)— — — (0.3)
Balance as of March 31, 2019244,838,786 8,110.4 1,325.7 (13.2)(31.2)9,391.7 
Net income— — 139.7 — 4.9 144.6 
Issuance of stock compensation and reinvested dividends, net of tax withholding41,982 (0.7)— — — (0.7)
Dividends declared on common stock ($0.475 per share)— — (115.8)— — (115.8)
Dividend equivalents declared— — (0.5)— — (0.5)
Stock compensation expense— 4.0 — — — 4.0 
Repurchase of common stock under repurchase plan(9,414,920)(550.4)— — — (550.4)
Distributions to shareholders of noncontrolling interests— — — — (2.1)(2.1)
Derivative hedging activity, net of tax— — — (15.8)— (15.8)
Other— (0.3)— — — (0.3)
Balance as of June 30, 2019235,465,848 7,563.0 1,349.1 (29.0)(28.4)8,854.7 
Net income— — 366.8 — 4.1 370.9 
Issuance of stock compensation and reinvested dividends, net of tax withholding4,737 — — — 
Dividends declared on common stock ($0.475 per share)— — (111.9)— — (111.9)
Dividend equivalents declared— — (0.9)— — (0.9)
Stock compensation expense— 3.5 — — — 3.5 
Repurchase of common stock under repurchase plan(7,569,029)(500.0)— — — (500.0)
Distributions to shareholders of noncontrolling interests— — — — (5.1)(5.1)
Derivative hedging activity, net of tax— — — (21.7)— (21.7)
Other— 0.4 — — — 0.4 
Balance as of September 30, 2019227,901,556 $7,066.9 $1,603.1 $(50.7)$(29.4)$8,589.9 
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
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EVERGY, INC.
Consolidated Statements of Changes in Equity
(Unaudited)
Evergy, Inc. Shareholders
Common stock sharesCommon stockRetained earningsAOCINon-controlling interestsTotal equity
(millions, except share amounts)
Balance as of December 31, 2019226,641,443 $7,070.4 $1,551.5 $(50.0)$(26.6)$8,545.3 
Net income— — 69.4 — 2.8 72.2 
Issuance of stock compensation and reinvested dividends, net of tax withholding97,305 (3.0)— — — (3.0)
Dividends declared on common stock ($0.505 per share)— — (114.5)— — (114.5)
Dividend equivalents declared— — (0.7)— — (0.7)
Stock compensation expense— 4.6 — — — 4.6 
Derivative hedging activity, net of tax— — — 1.3 — 1.3 
Other— 0.2 — — — 0.2 
Balance as of March 31, 2020226,738,748 7,072.2 1,505.7 (48.7)(23.8)8,505.4 
Net income— — 133.4 — 2.9 136.3 
Issuance of stock compensation and reinvested dividends, net of tax withholding86,357 (2.9)— — — (2.9)
Dividends declared on common stock ($0.505 per share)— — (114.6)— — (114.6)
Dividend equivalents declared— — (0.4)— — (0.4)
Stock compensation expense— 4.1 — — — 4.1 
Derivative hedging activity, net of tax— — — (1.0)— (1.0)
Change in unrecognized pension expense, net of tax— — — (0.1)— (0.1)
Other— 0.1 — — — 0.1 
Balance as of June 30, 2020226,825,105 7,073.5 1,524.1 (49.8)(20.9)8,526.9 
Net income— — 364.5 — 3.0 367.5 
Issuance of stock compensation and reinvested dividends, net of tax withholding7,305 — — — 
Dividends declared on common stock ($0.505 per share)— — (114.5)— — (114.5)
Dividend equivalents declared— — (0.6)— — (0.6)
Stock compensation expense— 3.4 — — — 3.4 
Derivative hedging activity, net of tax— — — 1.4 — 1.4 
Other— 0.1 — — — 0.1 
Balance as of September 30, 2020226,832,410 $7,077.0 $1,773.5 $(48.4)$(17.9)$8,784.2 
The accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

13

EVERGY KANSAS CENTRAL, INC.
Consolidated Balance Sheets
(Unaudited)
September 30December 31
 20202019
ASSETS(millions, except share amounts)
CURRENT ASSETS: 
Cash and cash equivalents$68.4 $5.2 
Receivables, net of allowance for credit losses of $5.5 and $3.8, respectively256.5 140.4 
Related party receivables39.0 9.9 
Accounts receivable pledged as collateral200.0 171.0 
Fuel inventory and supplies279.8 266.4 
Income taxes receivable29.3 30.4 
Regulatory assets93.3 93.3 
Prepaid expenses and other assets23.3 34.3 
Total Current Assets989.6 750.9 
PROPERTY, PLANT AND EQUIPMENT, NET10,054.8 9,864.9 
PROPERTY, PLANT AND EQUIPMENT OF VARIABLE INTEREST ENTITIES, NET156.7 162.0 
OTHER ASSETS:  
Regulatory assets699.7 730.4 
Nuclear decommissioning trust fund279.1 272.5 
Other267.4 266.0 
Total Other Assets1,246.2 1,268.9 
TOTAL ASSETS$12,447.3 $12,046.7 
The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
14

EVERGY KANSAS CENTRAL, INC.
Consolidated Balance Sheets
(Unaudited)
September 30December 31
 20202019
LIABILITIES AND EQUITY(millions, except share amounts)
CURRENT LIABILITIES:  
Current maturities of long-term debt$0 $250.0 
Current maturities of long-term debt of variable interest entities18.8 32.3 
Notes payable and commercial paper0 249.2 
Collateralized note payable200.0 171.0 
Accounts payable192.2 200.5 
Related party payables50.1 14.8 
Accrued taxes159.5 98.7 
Accrued interest64.4 74.2 
Regulatory liabilities23.6 42.3 
Asset retirement obligations23.3 23.3 
Accrued compensation and benefits21.1 14.2 
Other134.5 116.0 
Total Current Liabilities887.5 1,286.5 
LONG-TERM LIABILITIES:  
Long-term debt, net3,931.1 3,436.1 
Long-term debt of variable interest entities, net0 18.8 
Deferred income taxes853.6 817.7 
Unamortized investment tax credits67.0 253.2 
Regulatory liabilities1,410.9 1,132.5 
Pension and post-retirement liability462.4 495.5 
Asset retirement obligations398.6 249.6 
Other160.5 151.8 
Total Long-Term Liabilities7,284.1 6,555.2 
Commitments and Contingencies (Note 11)
EQUITY: 
Evergy Kansas Central, Inc. Shareholder's Equity:  
Common stock - 1,000 shares authorized, $0.01 par value, 1 share issued2,737.6 2,737.6 
Retained earnings1,556.0 1,494.0 
Total Evergy Kansas Central, Inc. Shareholder's Equity4,293.6 4,231.6 
Noncontrolling Interests(17.9)(26.6)
Total Equity4,275.7 4,205.0 
TOTAL LIABILITIES AND EQUITY$12,447.3 $12,046.7 
The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

15

EVERGY KANSAS CENTRAL, INC.
Consolidated Statements of Income
(Unaudited)
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
(millions)
OPERATING REVENUES$733.6 $749.0 $1,864.5 $1,931.3 
OPERATING EXPENSES:
Fuel and purchased power128.6 144.9 329.9 375.3 
SPP network transmission costs66.1 62.4 197.8 188.7 
Operating and maintenance137.4 140.4 376.3 396.4 
Depreciation and amortization113.4 110.9 339.0 331.3 
Taxes other than income tax47.4 48.0 145.1 145.3 
Total Operating Expenses492.9 506.6 1,388.1 1,437.0 
INCOME FROM OPERATIONS240.7 242.4 476.4 494.3 
OTHER INCOME (EXPENSE):
Investment earnings1.0 0.6 3.4 3.0 
Other income2.7 2.3 11.3 13.0 
Other expense(9.7)(10.8)(26.9)(29.9)
Total Other Expense, Net(6.0)(7.9)(12.2)(13.9)
Interest expense40.3 41.7 127.7 134.1 
INCOME BEFORE INCOME TAXES194.4 192.8 336.5 346.3 
Income tax expense22.5 25.8 149.2 46.2 
Equity in earnings of equity method investees, net of income taxes1.2 1.2 3.4 3.6 
NET INCOME173.1 168.2 190.7 303.7 
Less: Net income attributable to noncontrolling interests3.0 4.1 8.7 12.9 
NET INCOME ATTRIBUTABLE TO EVERGY KANSAS CENTRAL, INC.$170.1 $164.1 $182.0 $290.8 
The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.

16

EVERGY KANSAS CENTRAL, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Year to Date September 3020202019
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:(millions)
Net income$190.7 $303.7 
Adjustments to reconcile income to net cash from operating activities:
Depreciation and amortization339.0 331.3 
Amortization of nuclear fuel21.6 21.2 
Amortization of deferred refueling outage9.5 9.7 
Amortization of corporate-owned life insurance14.8 16.5 
Net deferred income taxes and credits155.0 9.5 
Allowance for equity funds used during construction(5.8)
Payments for asset retirement obligations(2.1)(9.5)
Equity in earnings of equity method investees, net of income taxes(3.4)(3.6)
Income from corporate-owned life insurance(6.8)(18.8)
Other(4.1)(4.1)
Changes in working capital items:
Accounts receivable(124.4)(55.4)
Accounts receivable pledged as collateral(29.0)(15.0)
Fuel inventory and supplies(12.9)29.5 
Prepaid expenses and other current assets7.0 12.2 
Accounts payable88.4 (10.4)
Accrued taxes61.9 92.8 
Other current liabilities(47.1)(5.8)
Changes in other assets33.3 23.8 
Changes in other liabilities(35.8)(31.1)
Cash Flows from Operating Activities649.8 696.5 
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:  
Additions to property, plant and equipment(494.2)(418.4)
Purchase of securities - trusts(16.7)(12.6)
Sale of securities - trusts16.3 13.4 
Investment in corporate-owned life insurance(15.6)(16.4)
Proceeds from investment in corporate-owned life insurance60.6 97.4 
Other investing activities(2.3)(3.2)
Cash Flows used in Investing Activities(451.9)(339.8)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:  
Short-term debt, net(249.2)(229.3)
Collateralized short-term debt, net29.0 15.0 
Proceeds from long-term debt493.0 294.7 
Retirements of long-term debt(250.0)(300.0)
Retirements of long-term debt of variable interest entities(32.3)(30.3)
Borrowings against cash surrender value of corporate-owned life insurance51.5 54.2 
Repayment of borrowings against cash surrender value of corporate-owned life insurance(52.5)(76.3)
Cash dividends paid(120.0)(110.0)
Distributions to shareholders of noncontrolling interests0 (8.5)
Other financing activities(4.2)(3.0)
Cash Flows used in Financing Activities(134.7)(393.5)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH63.2 (36.8)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period5.2 44.5 
End of period$68.4 $7.7 
The disclosures regarding Evergy Kansas Central included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
17

EVERGY KANSAS CENTRAL, INC.
Consolidated Statements of Changes in Equity
(Unaudited)
Evergy Kansas Central, Inc. Shareholder
Common stock sharesCommon stockRetained earningsNon-controlling interestsTotal equity
(millions, except share amounts)
Balance as of December 31, 2018$2,737.6 $1,260.6 $(37.5)$3,960.7 
Net income— — 64.4 3.9 68.3 
Dividends declared on common stock— — (110.0)— (110.0)
Consolidation of noncontrolling interests— — — 3.8 3.8 
Distributions to shareholders of noncontrolling interests— — — (1.4)(1.4)
Balance as of March 31, 20192,737.6 1,215.0 (31.2)3,921.4 
Net income— — 62.3 4.9 67.2 
Distributions to shareholders of noncontrolling interests— — — (2.1)(2.1)
Balance as of June 30, 20192,737.6 1,277.3 (28.4)3,986.5 
Net income— — 164.1 4.1 168.2 
Distributions to shareholders of noncontrolling interests— — — (5.1)(5.1)
Balance as of September 30, 2019$2,737.6 $1,441.4 $(29.4)$4,149.6 
Balance as of December 31, 2019$2,737.6 $1,494.0 $(26.6)$4,205.0 
Net income— — 52.4 2.8 55.2 
Dividends declared on common stock— — (60.0)— (60.0)
Balance as of March 31, 20202,737.6 1,486.4 (23.8)4,200.2 
Net income (loss)— — (40.5)2.9 (37.6)
Dividends declared on common stock— — (60.0)— (60.0)
Balance as of June 30, 20202,737.6 1,385.9 (20.9)4,102.6 
Net income— — 170.1 3.0 173.1 
Balance as of September 30, 2020$2,737.6 $1,556.0 $(17.9)$4,275.7 
The disclosures regarding Evergy Kansas Central included in the accompanying Unaudited Notes to Consolidated Financial Statements are an integral part of these statements.

18

EVERGY METRO, INC.
Consolidated Balance Sheets
(Unaudited)
September 30December 31
 20202019
ASSETS(millions, except share amounts)
CURRENT ASSETS: 
Cash and cash equivalents$224.3 $2.0 
Receivables, net of allowance for credit losses of $6.5 and $4.6, respectively80.0 48.1 
Related party receivables225.7 93.9 
Accounts receivable pledged as collateral130.0 118.0 
Fuel inventory and supplies173.2 163.0 
Income taxes receivable0 8.7 
Regulatory assets88.4 95.4 
Prepaid expenses25.4 22.8 
Other assets14.5 15.0 
Total Current Assets961.5 566.9 
PROPERTY, PLANT AND EQUIPMENT, NET7,027.1 6,839.0 
OTHER ASSETS:  
Regulatory assets490.6 464.4 
Nuclear decommissioning trust fund308.4 300.7 
Other137.5 134.1 
Total Other Assets936.5 899.2 
TOTAL ASSETS$8,925.1 $8,305.1 
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
19

EVERGY METRO, INC.
Consolidated Balance Sheets
(Unaudited)
September 30December 31
 20202019
LIABILITIES AND EQUITY(millions, except share amounts)
CURRENT LIABILITIES:  
Notes payable and commercial paper$0 $199.3 
Collateralized note payable130.0 118.0 
Accounts payable163.9 233.6 
Related party payables34.2 4.6 
Accrued taxes104.3 38.8 
Accrued interest38.2 26.7 
Regulatory liabilities7.5 11.4 
Asset retirement obligations33.0 36.1 
Accrued compensation and benefits48.9 45.1 
Other31.3 34.0 
Total Current Liabilities591.3 747.6 
LONG-TERM LIABILITIES:  
Long-term debt, net2,922.7 2,525.0 
Deferred income taxes554.7 642.8 
Unamortized investment tax credits118.7 119.6 
Regulatory liabilities885.6 792.2 
Pension and post-retirement liability561.5 499.7 
Asset retirement obligations348.4 217.5 
Other165.4 180.0 
Total Long-Term Liabilities5,557.0 4,976.8 
Commitments and Contingencies (Note 11)
EQUITY:  
Common stock - 1,000 shares authorized, without par value, 1 share issued, stated value1,563.1 1,563.1 
Retained earnings1,209.0 1,012.8 
Accumulated other comprehensive income4.7 4.8 
Total Equity2,776.8 2,580.7 
TOTAL LIABILITIES AND EQUITY$8,925.1 $8,305.1 
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
20

EVERGY METRO, INC.
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
(millions)
OPERATING REVENUES$528.5 $568.8 $1,328.3 $1,431.2 
OPERATING EXPENSES:  
Fuel and purchased power112.2 129.3 306.0 380.4 
Operating and maintenance101.3 111.2 305.7 341.2 
Depreciation and amortization79.4 80.2 243.6 239.0 
Taxes other than income tax31.2 32.6 92.4 96.3 
Total Operating Expenses324.1 353.3 947.7 1,056.9 
INCOME FROM OPERATIONS204.4 215.5 380.6 374.3 
OTHER INCOME (EXPENSE):
Investment earnings0.5 0.5 1.3 1.9 
Other income4.0 1.2 5.1 2.3 
Other expense(6.9)(4.9)(20.2)(15.7)
Total Other Expense, Net(2.4)(3.2)(13.8)(11.5)
Interest expense29.2 28.2 85.5 91.6 
INCOME BEFORE INCOME TAXES172.8 184.1 281.3 271.2 
Income tax expense25.1 32.2 5.1 43.9 
NET INCOME$147.7 $151.9 $276.2 $227.3 
COMPREHENSIVE INCOME
NET INCOME$147.7 $151.9 $276.2 $227.3 
OTHER COMPREHENSIVE INCOME:
Derivative hedging activity
Reclassification to expenses, net of tax(0.2)(0.1)(0.1)0.7 
Derivative hedging activity, net of tax(0.2)(0.1)(0.1)0.7 
Total other comprehensive income (loss)(0.2)(0.1)(0.1)0.7 
COMPREHENSIVE INCOME$147.5 $151.8 $276.1 $228.0 
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
21

EVERGY METRO, INC.
Consolidated Statements of Cash Flows
(Unaudited)
Year to Date September 3020202019
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:(millions)
Net income$276.2 $227.3 
Adjustments to reconcile income to net cash from operating activities:
Depreciation and amortization243.6 239.0 
Amortization of nuclear fuel22.1 21.4 
Amortization of deferred refueling outage9.5 9.7 
Net deferred income taxes and credits3.0 2.5 
Allowance for equity funds used during construction(4.1)(0.9)
Payments for asset retirement obligations(2.7)(1.7)
Other(0.3)0.4 
Changes in working capital items:
Accounts receivable(84.3)(4.1)
Accounts receivable pledged as collateral(12.0)
Fuel inventory and supplies(10.2)20.4 
Prepaid expenses and other current assets(4.7)36.2 
Accounts payable(20.1)(66.3)
Accrued taxes74.2 70.3 
Other current liabilities14.5 (49.0)
Changes in other assets37.7 32.7 
Changes in other liabilities14.2 18.6 
Cash Flows from Operating Activities556.6 556.5 
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:  
Additions to property, plant and equipment(384.9)(313.0)
Purchase of securities - trusts(33.7)(24.8)
Sale of securities - trusts27.9 18.9 
Net money pool lending(78.0)
Other investing activities2.5 5.1 
Cash Flows used in Investing Activities(466.2)(313.8)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:  
Short-term debt, net(199.3)(102.0)
Collateralized short-term debt, net12.0 
Proceeds from long-term debt396.4 393.2 
Retirements of long-term debt0 (400.0)
Cash dividends paid(80.0)(135.0)
Other financing activities2.8 1.9 
Cash Flows from (used in) Financing Activities131.9 (241.9)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH222.3 0.8 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
Beginning of period2.0 2.6 
End of period$224.3 $3.4 
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
22

EVERGY METRO, INC
Consolidated Statements of Changes in Equity
(Unaudited)
 Common stock shares Common Stock Retained earnings AOCI - Net gains (losses) on cash flow hedges Total Equity
 (millions, except share amounts)
Balance as of December 31, 2018$1,563.1 $932.6 $4.1 $2,499.8 
Net income— — 16.0 — 16.0 
Derivative hedging activity, net of tax— — — 0.9 0.9 
Balance as of March 31, 20191,563.1 948.6 5.0 2,516.7 
Net income— — 59.4 — 59.4 
Dividends declared on common stock— — (65.0)— (65.0)
Derivative hedging activity, net of tax— — — (0.1)(0.1)
Balance as of June 30, 20191,563.1 943.0 4.9 2,511.0 
Net income— — 151.9 — 151.9 
Dividends declared on common stock— — (70.0)— (70.0)
Balance as of September 30, 2019$1,563.1 $1,024.9 $4.9 $2,592.9 
Balance as of December 31, 2019$1,563.1 $1,012.8 $4.8 $2,580.7 
Net income— — 25.6 — 25.6 
Dividends declared on common stock— — (60.0)— (60.0)
Derivative hedging activity, net of tax— — — (0.1)(0.1)
Balance as of March 31, 20201,563.1 978.4 4.7 2,546.2 
Net income— — 102.9 — 102.9 
Dividends declared on common stock— — (20.0)— (20.0)
Derivative hedging activity, net of tax— — — 0.2 0.2 
Balance as of June 30, 20201,563.1 1,061.3 4.9 2,629.3 
Net income— — 147.7 — 147.7 
Derivative hedging activity, net of tax— — — (0.2)(0.2)
Balance as of September 30, 2020$1,563.1 $1,209.0 $4.7 $2,776.8 
The disclosures regarding Evergy Metro included in the accompanying Notes to Unaudited Consolidated Financial Statements are an integral part of these statements.
23

EVERGY, INC.
EVERGY KANSAS CENTRAL, INC.
EVERGY METRO, INC.
Combined Notes to Unaudited Consolidated Financial Statements
The notes to unaudited consolidated financial statements that follow are a combined presentation for Evergy, Inc., Evergy Kansas Central, Inc. and Evergy Metro, Inc., all registrants under this filing.  The terms "Evergy," "Evergy Kansas Central," "Evergy Metro" and "Evergy Companies" are used throughout this report.  "Evergy" refers to Evergy, Inc. and its consolidated subsidiaries, unless otherwise indicated.  "Evergy Kansas Central" refers to Evergy Kansas Central, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Metro" refers to Evergy Metro, Inc. and its consolidated subsidiaries, unless otherwise indicated. "Evergy Companies" refers to Evergy, Evergy Kansas Central, and Evergy Metro, collectively, which are individual registrants within the Evergy consolidated group.
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Evergy is a public utility holding company incorporated in 2017 and headquartered in Kansas City, Missouri. Evergy operates primarily through the following wholly-owned direct subsidiaries listed below.
Evergy Kansas Central, Inc. (Evergy Kansas Central) is an integrated, regulated electric utility that provides electricity to customers in the state of Kansas. Evergy Kansas Central has 1 active wholly-owned subsidiary with significant operations, Evergy Kansas South, Inc. (Evergy Kansas South).
Evergy Metro, Inc. (Evergy Metro) is an integrated, regulated electric utility that provides electricity to customers in the states of Missouri and Kansas.
Evergy Missouri West, Inc. (Evergy Missouri West) is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.
Evergy Transmission Company, LLC (Evergy Transmission Company) owns 13.5% of Transource Energy, LLC (Transource) with the remaining 86.5% owned by AEP Transmission Holding Company, LLC, a subsidiary of American Electric Power Company, Inc. (AEP). Transource is focused on the development of competitive electric transmission projects. Evergy Transmission Company accounts for its investment in Transource under the equity method.
Evergy Kansas Central also owns a 50% interest in Prairie Wind Transmission, LLC (Prairie Wind), which is a joint venture between Evergy Kansas Central and subsidiaries of AEP and Berkshire Hathaway Energy Company. Prairie Wind owns a 108-mile, 345 kV double-circuit transmission line that provides transmission service in the Southwest Power Pool, Inc. (SPP). Evergy Kansas Central accounts for its investment in Prairie Wind under the equity method.

Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West conduct business in their respective service territories using the name Evergy. Collectively, the Evergy Companies have approximately 14,700 MWs of owned generating capacity and renewable purchased power agreements and engage in the generation, transmission, distribution and sale of electricity to approximately 1.6 million customers in the states of Kansas and Missouri.
Basis of Presentation
These unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these unaudited consolidated financial statements do not include all of the information and notes required by GAAP for annual financial statements and should be read in conjunction with the consolidated financial statements in the Evergy Companies' combined 2019 Form 10-K.
24

These unaudited consolidated financial statements, in the opinion of management, reflect all normal recurring adjustments necessary to fairly present the unaudited consolidated financial statements for each of the Evergy Companies for these interim periods. In preparing financial statements that conform to GAAP, management must make estimates and assumptions that affect the reported amounts of assets and liabilities, the reported amounts of revenues and expenses, and the disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
Principles of Consolidation
Each of Evergy's, Evergy Kansas Central's and Evergy Metro's unaudited consolidated financial statements includes the accounts of their subsidiaries and variable interest entities (VIEs) of which they are the primary beneficiary. Undivided interests in jointly-owned generation facilities are included on a proportionate basis.  Intercompany transactions have been eliminated. The Evergy Companies assess financial performance and allocate resources on a consolidated basis (i.e., operate in 1 segment).
Fuel Inventory and Supplies
The Evergy Companies record fuel inventory and supplies at average cost. The following table separately states the balances for fuel inventory and supplies.
September 30
2020
December 31
2019
Evergy(millions)
Fuel inventory$153.7 $146.4 
Supplies358.4 335.2 
Fuel inventory and supplies$512.1 $481.6 
Evergy Kansas Central
Fuel inventory$84.9 $80.2 
Supplies194.9 186.2 
Fuel inventory and supplies$279.8 $266.4 
Evergy Metro  
Fuel inventory$47.5 $46.1 
Supplies125.7 116.9 
Fuel inventory and supplies$173.2 $163.0 
25

Property, Plant and Equipment
The following tables summarize the property, plant and equipment of Evergy, Evergy Kansas Central and Evergy Metro.
September 30, 2020EvergyEvergy Kansas CentralEvergy Metro
(millions)
Electric plant in service$28,670.5 $13,947.2 $11,110.9 
Electric plant acquisition adjustment724.3 724.3 
Accumulated depreciation(10,849.4)(5,210.0)(4,487.3)
Plant in service, net18,545.4 9,461.5 6,623.6 
Construction work in progress946.6 527.1 337.6 
Nuclear fuel, net131.2 65.3 65.9 
Plant to be retired, net(a)
0.9 0.9 
Property, plant and equipment, net$19,624.1 $10,054.8 $7,027.1 
December 31, 2019EvergyEvergy Kansas CentralEvergy Metro
(millions)
Electric plant in service$27,768.8 $13,538.1 $10,776.5 
Electric plant acquisition adjustment740.6 740.6 
Accumulated depreciation(10,293.7)(4,951.5)(4,272.0)
Plant in service, net18,215.7 9,327.2 6,504.5 
Construction work in progress839.2 472.8 269.9 
Nuclear fuel, net128.5 63.9 64.6 
Plant to be retired, net(a)
1.0 1.0 
Property, plant and equipment, net$19,184.4 $9,864.9 $6,839.0 
(a) As of September 30, 2020 and December 31, 2019, represents the planned retirement of Evergy Kansas Central analog meters prior to the end of their remaining useful lives.
Other Income (Expense), Net
The table below shows the detail of other expense for each of the Evergy Companies.
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
Evergy(millions)
Non-service cost component of net benefit cost$(13.7)$(13.7)$(43.7)$(40.9)
Other(6.4)(6.0)(14.0)(16.3)
Other expense$(20.1)$(19.7)$(57.7)$(57.2)
Evergy Kansas Central
Non-service cost component of net benefit cost$(4.1)$(4.9)$(14.1)$(14.5)
Other(5.6)(5.9)(12.8)(15.4)
Other expense$(9.7)$(10.8)$(26.9)$(29.9)
Evergy Metro
Non-service cost component of net benefit cost$(6.5)$(5.0)$(19.7)$(15.3)
Other(0.4)0.1 (0.5)(0.4)
Other expense$(6.9)$(4.9)$(20.2)$(15.7)
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Earnings Per Share
To compute basic earnings per share (EPS), Evergy divides net income attributable to Evergy, Inc. by the weighted average number of common shares outstanding. Diluted EPS includes the effect of issuable common shares resulting from restricted share units (RSUs), performance shares and restricted stock. Evergy computes the dilutive effects of potential issuances of common shares using the treasury stock method.

The following table reconciles Evergy's basic and diluted EPS.
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
Income(millions, except per share amounts)
Net income$367.5 $370.9 $576.0 $618.9 
Less: Net income attributable to noncontrolling interests3.0 4.1 8.7 12.9 
Net income attributable to Evergy, Inc.$364.5 $366.8 $567.3 $606.0 
Common Shares Outstanding  
Weighted average number of common shares outstanding - basic227.3 234.6 227.2 243.5 
Add: Effect of dilutive securities0.2 0.4 0.3 0.3 
Weighted average number of common shares outstanding - dilutive227.5 235.0 227.5 243.8 
Basic EPS$1.60 $1.56 $2.50 $2.49 
Diluted EPS$1.60 $1.56 $2.49 $2.49 
Anti-dilutive shares excluded from the computation of diluted EPS for the three months ended and year to date September 30, 2020, were 124,136 RSUs with performance measures. There were 0 anti-dilutive securities excluded from the computation of diluted EPS for the three months ended and year to date September 30, 2019.
Dividends Declared
In November 2020, Evergy's Board of Directors (Evergy Board) declared a quarterly dividend of $0.535 per share on Evergy's common stock. The common dividend is payable December 21, 2020, to shareholders of record as of November 20, 2020.
In November 2020, Evergy Kansas Central's Board of Directors declared a cash dividend payable to Evergy of $40.0 million, payable on December 18, 2020.
In November 2020, Evergy Metro's Board of Directors declared a cash dividend payable to Evergy of $40.0 million, payable on December 18, 2020.
Supplemental Cash Flow Information
Evergy
Year to Date September 3020202019
Cash paid for (received from):(millions)
Interest, net of amounts capitalized$267.8 $240.8 
Interest of VIEs0.8 1.6 
Income taxes, net of refunds(73.8)(13.1)
Right-of-use assets obtained in exchange for new operating lease liabilities4.1 3.0 
Right-of-use assets obtained in exchange for new finance lease liabilities5.0 2.3 
Non-cash investing transactions:
Property, plant and equipment additions371.0 99.4 
Non-cash financing transactions:
Issuance of stock for compensation and reinvested dividends0.9 (0.3)
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Evergy Kansas Central
Year to Date September 3020202019
Cash paid for (received from):(millions)
Interest, net of amounts capitalized$114.1 $109.4 
Interest of VIEs0.8 1.6 
Income taxes, net of refunds(6.4)1.8 
Right-of-use assets obtained in exchange for new operating lease liabilities3.8 0.6 
Right-of-use assets obtained in exchange for new finance lease liabilities3.7 2.3 
Non-cash investing transactions:
Property, plant and equipment additions183.8 35.3 
Evergy Metro
Year to Date September 3020202019
Cash paid for (received from):(millions)
Interest, net of amounts capitalized$73.3 $83.5 
Income taxes, net of refunds(7.3)32.8 
Right-of-use assets obtained in exchange for new operating lease liabilities0.3 2.4 
Right-of-use assets obtained in exchange for new finance lease liabilities1.3 
Non-cash investing transactions:
Property, plant and equipment additions165.6 60.8 
Non-cash property, plant and equipment additions year to date September 30, 2020 for Evergy, Evergy Kansas Central and Evergy Metro include a non-cash addition related to the revision in estimate of the Wolf Creek Generating Station (Wolf Creek) asset retirement obligation (ARO) liability in the third quarter of 2020. See Note 6 for more details.
2. REVENUE
Evergy's, Evergy Kansas Central's and Evergy Metro's revenues disaggregated by customer class are summarized in the following tables.
Three Months Ended September 30, 2020EvergyEvergy Kansas CentralEvergy Metro
Revenues(millions)
Residential$636.4 $262.9 $241.2 
Commercial499.5 205.2 213.3 
Industrial166.8 105.7 36.6 
Other retail9.5 4.4 2.7 
Total electric retail$1,312.2 $578.2 $493.8 
Wholesale85.0 68.7 9.7 
Transmission80.7 72.9 3.5 
Industrial steam and other5.6 0.9 0.8 
Total revenue from contracts with customers$1,483.5 $720.7 $507.8 
Other34.1 12.9 20.7 
Operating revenues$1,517.6 $733.6 $528.5 
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Year to Date September 30, 2020EvergyEvergy Kansas CentralEvergy Metro
Revenues(millions)
Residential$1,515.6 $627.5 $572.2 
Commercial1,272.9 511.0 558.1 
Industrial446.7 284.6 99.6 
Other retail29.2 13.3 8.9 
Total electric retail$3,264.4 $1,436.4 $1,238.8 
Wholesale195.8 168.1 16.7 
Transmission238.5 215.2 10.4 
Industrial steam and other16.8 2.1 2.7 
Total revenue from contracts with customers$3,715.5 $1,821.8 $1,268.6 
Other103.5 42.7 59.7 
Operating revenues$3,819.0 $1,864.5 $1,328.3 
Three Months Ended September 30, 2019EvergyEvergy Kansas CentralEvergy Metro
Revenues(millions)
Residential$653.0 $268.9 $249.2 
Commercial539.1 219.3 234.1 
Industrial175.3 111.3 40.8 
Other retail16.0 5.6 7.0 
Total electric retail$1,383.4 $605.1 $531.1 
Wholesale96.3 67.7 23.5 
Transmission80.4 67.7 7.8 
Industrial steam and other6.2 1.7 0.6 
Total revenue from contracts with customers$1,566.3 $742.2 $563.0 
Other11.3 6.8 5.8 
Operating revenues$1,577.6 $749.0 $568.8 
Year to Date September 30, 2019EvergyEvergy Kansas CentralEvergy Metro
Revenues(millions)
Residential$1,536.3 $640.4 $575.5 
Commercial1,391.2 556.4 613.5 
Industrial478.9 308.5 106.7 
Other retail35.3 15.8 12.3 
Total electric retail$3,441.7 $1,521.1 $1,308.0 
Wholesale251.7 182.5 54.7 
Transmission233.5 205.5 14.0 
Industrial steam and other18.9 4.6 2.3 
Total revenue from contracts with customers$3,945.8 $1,913.7 $1,379.0 
Other70.4 17.6 52.2 
Operating revenues$4,016.2 $1,931.3 $1,431.2 
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3. RECEIVABLES
The Evergy Companies' receivables are detailed in the following table.
September 30
2020
December 31
2019
Evergy(millions)
Customer accounts receivable - billed$8.6 $7.2 
Customer accounts receivable - unbilled143.9 104.0 
Other receivables181.2 127.8 
Allowance for credit losses(15.2)(10.5)
Total$318.5 $228.5 
Evergy Kansas Central
Customer accounts receivable - billed$$
Customer accounts receivable - unbilled55.3 49.7 
Other receivables206.7 94.5 
Allowance for credit losses(5.5)(3.8)
Total$256.5 $140.4 
Evergy Metro  
Customer accounts receivable - billed$4.9 $3.1 
Customer accounts receivable - unbilled56.9 26.5 
Other receivables24.7 23.1 
Allowance for credit losses(6.5)(4.6)
Total$80.0 $48.1 
Evergy's, Evergy Kansas Central's and Evergy Metro's other receivables at September 30, 2020 and December 31, 2019, consisted primarily of receivables from partners in jointly-owned electric utility plants, wholesale sales receivables and receivables related to alternative revenue programs. The Evergy Companies' other receivables also included receivables from contracts with customers as summarized in the following table.
September 30
2020
December 31
2019
(millions)
Evergy$58.8 $42.0 
Evergy Kansas Central49.9 37.7 
Evergy Metro6.1 1.2 
Allowance for Credit Losses
Historical loss information generally provides the basis for the Evergy Companies' assessment of expected credit losses. The Evergy Companies use an aging of accounts receivable method to assess historical loss information. When historical experience may not fully reflect the Evergy Companies' expectations about the future, the Evergy Companies will adjust historical loss information, as necessary, to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information.

Receivables are charged off when they are deemed uncollectible, which is based on a number of factors including specific facts surrounding an account and management's judgment.
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The change in the Evergy Companies' allowance for credit losses is summarized in the following table.
20202019
Evergy(millions)
Beginning balance January 1$10.5 $9.2 
Credit loss expense15.5 22.4 
Write-offs(20.8)(31.9)
Recoveries of prior write-offs10.0 9.2 
Ending balance September 30$15.2 $8.9 
Evergy Kansas Central
Beginning balance January 1$3.8 $3.9 
Credit loss expense6.9 5.6 
Write-offs(7.3)(8.8)
Recoveries of prior write-offs2.1 2.7 
Ending balance September 30$5.5 $3.4 
Evergy Metro
Beginning balance January 1$4.6 $3.8 
Credit loss expense5.5 11.7 
Write-offs(8.9)(16.2)
Recoveries of prior write-offs5.3 4.6 
Ending balance September 30$6.5 $3.9 
Sale of Accounts Receivable
Evergy Kansas Central, Evergy Metro and Evergy Missouri West sell an undivided percentage ownership interest in their retail electric accounts receivable to independent outside investors. These sales are accounted for as secured borrowings with accounts receivable pledged as collateral and a corresponding short-term collateralized note payable recognized on the balance sheets.  The Evergy Companies' accounts receivable pledged as collateral and the corresponding short-term collateralized note payable are summarized in the following table.
September 30
2020
December 31
2019
(millions)
Evergy$395.0 $339.0 
Evergy Kansas Central200.0 171.0 
Evergy Metro130.0 118.0 
Each receivable sale facility expires in September 2021. Evergy Kansas Central's facility allows for $185.0 million in aggregate outstanding principal amount of borrowings from mid-October through mid-June and then $200.0 million from mid-June through mid-October. Evergy Metro's facility allows for $130.0 million in aggregate outstanding principal amount of borrowings at any time. Evergy Missouri West's facility allows for $50.0 million in aggregate outstanding principal amount of borrowings from mid-November through mid-June and then $65.0 million from mid-June through mid-November.
4. RATE MATTERS AND REGULATION
KCC Proceedings
Evergy Kansas Central 2020 Transmission Delivery Charge (TDC)
In March 2020, the State Corporation Commission of the State of Kansas (KCC) issued an order adjusting Evergy Kansas Central's retail prices to include updated transmission costs as reflected in the Federal Energy Regulatory Commission (FERC) transmission formula rate (TFR). The new prices were effective in April 2020 and are expected to increase Evergy Kansas Central's annual retail revenues by $3.5 million when compared to 2019.
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Evergy Metro 2020 TDC
In April 2020, the KCC issued an order adjusting Evergy Metro's retail prices to include updated transmission costs as reflected in the FERC TFR. The new prices were effective in May 2020 and are expected to decrease Evergy Metro's annual retail revenues by $2.7 million when compared to 2019.
Evergy Kansas Central and Evergy Metro Earnings Review and Sharing Plan (ERSP)
As part of their merger settlement agreement with the KCC, Evergy Kansas Central and Evergy Metro agreed to participate in an ERSP for the years 2019 through 2022. Under the ERSP, Evergy Kansas Central's and Evergy Metro's Kansas jurisdiction are required to refund to customers 50% of annual earnings in excess of their authorized return on equity of 9.3% to the extent the excess earnings exceed the amount of Evergy Kansas Central's and Evergy Metro's annual merger bill credits for the year being measured.
Evergy Kansas Central's and Evergy Metro's 2019 calculations of annual earnings did not exceed their authorized return on equity of 9.3% and therefore did not result in any customer refund obligations. These calculations were filed with the KCC in April 2020. As of September 30, 2020, Evergy Kansas Central and Evergy Metro estimate their 2020 annual earnings will not result in a refund obligation. The final refund obligations for 2020, if any, will be decided by the KCC and could vary from the current estimates.
Evergy Kansas Central and Evergy Metro COVID-19 Accounting Authority Order (AAO) Request
In May 2020, Evergy Kansas Central and Evergy Metro filed a joint request for an AAO with the KCC that would allow for the extraordinary costs and lost revenues incurred by the companies, net of any COVID-19-related savings, as a result of the COVID-19 pandemic to be considered for future recovery from customers as part of their next rate cases.
In July 2020, the KCC granted Evergy Kansas Central's and Evergy Metro's request for an AAO as discussed above. As a result of the KCC's order, Evergy Kansas Central and Evergy Metro will record to a regulatory asset all net incremental costs incurred associated with the COVID-19 pandemic for consideration in their next rate cases, which are expected to be completed no later than the end of 2023. Additionally, the KCC order states that the KCC will also consider granting the recovery of Evergy Kansas Central's and Evergy Metro's lost revenues associated with the COVID-19 pandemic as part of their next rate cases. If granted, these lost revenues would be recognized prospectively as billed to customers in future rates.
MPSC Proceedings
Evergy Missouri West Other Proceedings
In December 2018, the Office of the Public Counsel (OPC) and the Midwest Energy Consumers Group (MECG) filed a petition with the Public Service Commission of the State of Missouri (MPSC) requesting an AAO that would require Evergy Missouri West to record a regulatory liability for all revenues collected from customers for return on investment, non-fuel operations and maintenance costs, taxes including accumulated deferred income taxes, and all other costs associated with Sibley Station following the station’s retirement in November 2018.
In October 2019, the MPSC granted OPC's and MECG's request for an AAO and required Evergy Missouri West to record to a regulatory liability the revenues discussed above for consideration in Evergy Missouri West's next rate case, which is expected to be completed no later than 2022. Depending on the MPSC's decision in this next rate case, Evergy Missouri West could be required to refund to customers all or a portion of amounts collected in revenue for Sibley Station since December 2018 or, alternatively, could be required to make no refunds.
As a result of the MPSC order, Evergy has recorded a regulatory liability of $18.3 million as of September 30, 2020 for the estimated amount of revenues that Evergy Missouri West has collected from customers for Sibley Station since December 2018 that Evergy has determined is probable of refund. Evergy expects that it will continue to defer such amounts as collected from customers until new rates become effective in Evergy Missouri West's next rate case.
The accrual for this estimated amount does not include certain revenues collected related to Sibley Station that Evergy has determined to not be probable of refund in the next rate case based on the relevant facts and
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circumstances. While Evergy has determined these additional revenues to not be probable of refund, the ultimate resolution of this matter in Evergy Missouri West's next rate case is uncertain and could result in an estimated loss of up to approximately $12 million per year in excess of the amount accrued until Evergy Missouri West's new rates become effective. Evergy's regulatory liability for probable refunds as of September 30, 2020 and estimated loss in excess of the amount accrued represent estimates that could change significantly based on ongoing developments including as a result of an appeal of the MPSC order, decisions in other regulatory proceedings that establish precedent applicable to this matter and positions of parties on this issue in a future Evergy Missouri West rate case.
Evergy Metro and Evergy Missouri West COVID-19 AAO Request
In May 2020, Evergy Metro and Evergy Missouri West filed a joint request for an AAO with the MPSC that would allow for the extraordinary costs and lost revenues incurred by the companies, net of any COVID-19-related savings, as a result of the COVID-19 pandemic to be considered for future recovery from customers as part of their next rate cases. In October 2020, Evergy Metro and Evergy Missouri West entered into a non-unanimous stipulation and agreement with the MPSC staff and other intervenors that would allow Evergy Metro and Evergy Missouri West to defer to a regulatory asset certain net incremental costs incurred associated with the COVID-19 pandemic for consideration in their next rate cases. A decision by the MPSC regarding the non-unanimous stipulation and agreement is expected in January 2021.
FERC Proceedings
Evergy Kansas Central TFR
Evergy Kansas Central's TFR, effective in January 2020, includes projected 2020 transmission capital expenditures and operating costs and is expected to increase annual transmission revenues by $6.8 million when compared to 2019. This rate is the most significant component in the retail rate calculation for Evergy Kansas Central's annual request with the KCC to adjust retail prices to include updated transmission costs through the TDC.
Evergy Kansas Central's TFR, effective in January 2021, includes projected 2021 transmission capital expenditures and operating costs and is expected to increase annual transmission revenues by $32.4 million when compared to 2020. The increase was primarily driven by higher projected capital expenditures and a lower prior year true-up adjustment in 2021. This rate is the most significant component in the retail rate calculation for Evergy Kansas Central's annual request with the KCC to adjust retail prices to include updated transmission costs through the TDC.
Evergy Metro TFR
Evergy Metro's TFR, effective in January 2020, includes projected 2020 transmission capital expenditures and operating costs and is expected to decrease annual transmission revenues by $1.7 million when compared to 2019. This rate is the most significant component in the retail rate calculation for Evergy Metro's annual request with the KCC to adjust retail prices to include updated transmission costs through the TDC.
Evergy Metro's TFR, effective in January 2021, includes projected 2021 transmission capital expenditures and operating costs and is expected to decrease annual transmission revenues by $3.9 million when compared to 2020. This rate is the most significant component in the retail rate calculation for Evergy Metro's annual request with the KCC to adjust retail prices to include updated transmission costs through the TDC.
5. GOODWILL
Accounting rules require goodwill to be tested for impairment annually and when an event occurs indicating the possibility that an impairment exists. Evergy's impairment test for the $2,336.6 million of goodwill that was recorded as a result of the Great Plains Energy Incorporated (Great Plains Energy) and Evergy Kansas Central merger was conducted as of May 1, 2020. The goodwill impairment test consists of comparing the fair value of a reporting unit to its carrying amount, including goodwill, to identify potential impairment. In the event that the carrying amount exceeds the fair value of the reporting unit, an impairment loss is recognized for the difference between the carrying amount of the reporting unit and its fair value. Evergy's consolidated operations are considered 1 reporting unit for assessment of impairment, as management assesses financial performance and allocates resources on a consolidated basis. The determination of fair value of the reporting unit consisted of two valuation techniques: an income approach consisting of a discounted cash flow analysis and a market approach
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consisting of a determination of reporting unit invested capital using a market multiple derived from the historical earnings before interest, income taxes, depreciation and amortization and market prices of the stock of peer companies. The results of the two techniques were evaluated and weighted to determine a point within the range that management considered representative of fair value for the reporting unit. The fair value of the reporting unit exceeded the carrying amount, including goodwill. As a result, there was no impairment of goodwill.
6. ASSET RETIREMENT OBLIGATIONS
AROs associated with tangible long-lived assets are legal obligations that exist under enacted laws, statutes and written or oral contracts, including obligations arising under the doctrine of promissory estoppel. These liabilities are recognized at estimated fair value as incurred with a corresponding amount capitalized as part of the cost of the related long-lived assets and depreciated over their useful lives. Accretion of the liabilities due to the passage of time is recorded to a regulatory asset and/or liability. Changes in the estimated fair values of the liabilities are recognized when known.
Evergy Kansas Central, Evergy Metro and Evergy Missouri West have AROs related to asbestos abatement and the closure and post-closure care of ponds and landfills containing coal combustion residuals (CCRs). In addition, Evergy Kansas Central and Evergy Metro have AROs related to decommissioning Wolf Creek and the retirement of wind generation facilities.
The MPSC and KCC require the owners of Wolf Creek, including Evergy Kansas South and Evergy Metro with their respective 47% ownership shares, to submit an updated decommissioning cost study every three years. The most recent study was submitted to the MPSC and KCC in September 2020. As a result of changes in estimates related to the study, Evergy, Evergy Kansas Central and Evergy Metro recorded increases to their AROs to decommission Wolf Creek of $259.1 million, $140.7 million and $118.4 million, respectively, in the third quarter of 2020.
The following table summarizes the change in the Evergy Companies' AROs for the periods ending September 30, 2020 and December 31, 2019.
EvergyEvergy Kansas CentralEvergy Metro
202020192020201920202019
(millions)
Beginning balance January 1$674.1 $687.1 $272.9 $281.1 $253.6 $261.0 
Revision in timing and/or
estimates
257.0 (22.3)136.9 (12.4)118.4 (9.9)
Settlements(11.0)(17.8)(2.1)(14.8)(2.7)(2.5)
Accretion28.7 27.1 14.2 19.0 12.1 5.0 
Ending balance$948.8 $674.1 $421.9 $272.9 $381.4 $253.6 
Less: current portion(66.5)(71.3)(23.3)(23.3)(33.0)(36.1)
Total noncurrent asset
retirement obligation
$882.3 $602.8 $398.6 $249.6 $348.4 $217.5 
7. PENSION PLANS AND POST-RETIREMENT BENEFITS
Evergy and certain of its subsidiaries maintain, and Evergy Kansas Central and Evergy Metro participate in, qualified non-contributory defined benefit pension plans covering the majority of Evergy Kansas Central's and Evergy Metro's employees as well as certain non-qualified plans covering certain active and retired officers. Evergy is also responsible for its indirect 94% ownership share of Wolf Creek's defined benefit plans, consisting of Evergy Kansas South's and Evergy Metro's respective 47% ownership shares.
For the majority of employees, pension benefits under these plans reflect the employees' compensation, years of service and age at retirement. However, for the plan covering Evergy Kansas Central's employees, the benefits for non-union employees hired between 2002 and the second quarter of 2018 and union employees hired beginning in 2012 are derived from a cash balance account formula. The plan was closed to future non-union employees in
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2018. For the plans covering Evergy Metro's employees, the benefits for union employees hired beginning in 2014 are derived from a cash balance account formula and the plans were closed to future non-union employees in 2014.
Evergy and its subsidiaries also provide certain post-retirement health care and life insurance benefits for substantially all retired employees of Evergy Kansas Central and Evergy Metro and their respective shares of Wolf Creek's post-retirement benefit plans.
The Evergy Companies record pension and post-retirement expense in accordance with rate orders from the KCC and MPSC that allow the difference between pension and post-retirement costs under GAAP and costs for ratemaking to be recognized as a regulatory asset or liability.  This difference between financial and regulatory accounting methods is due to timing and will be eliminated over the life of the plans.
For the three months ended and year to date September 30, 2020, Evergy and Evergy Metro recorded pension settlement charges of $10.0 million and $12.7 million, respectively. For the three months ended and year to date September 30, 2019, Evergy and Evergy Metro recorded pension settlement charges of $14.5 million and $20.8 million, respectively. These settlement charges were the result of accelerated pension distributions related to voluntary severance programs. Evergy and Evergy Metro deferred substantially all of the charges to a regulatory asset and expect to recover these amounts over future periods pursuant to regulatory agreements.
The following tables provide the components of net periodic benefit costs prior to the effects of capitalization and sharing with joint owners of power plants.
Pension BenefitsPost-Retirement Benefits
Three Months Ended September 30, 2020EvergyEvergy Kansas CentralEvergy MetroEvergyEvergy Kansas CentralEvergy Metro
Components of net periodic benefit costs(millions)
Service cost$20.1 $6.8 $13.3 $0.7 $0.3 $0.4 
Interest cost24.0 11.7 12.1 2.3 1.2 1.1 
Expected return on plan assets(26.3)(13.3)(13.5)(2.4)(1.7)(0.7)
Prior service cost0.4 0.4 0.2 0.1 0.1 
Recognized net actuarial (gain)/loss12.1 8.5 11.6 0.1 (0.1)
Settlement and special termination benefits10.0 12.7 
Net periodic benefit costs before regulatory adjustment and intercompany allocations40.3 14.1 36.4 0.8 (0.1)0.7 
Regulatory adjustment(0.4)0.4 (11.3)(1.0)(0.7)(0.2)
Intercompany allocations1.6 (5.8)0.1 (0.1)
Net periodic benefit costs (income)$39.9 $16.1 $19.3 $(0.2)$(0.7)$0.4 
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Pension BenefitsPost-Retirement Benefits
Year to Date September 30, 2020EvergyEvergy Kansas CentralEvergy MetroEvergyEvergy Kansas CentralEvergy Metro
Components of net periodic benefit costs(millions)
Service cost$59.2 $20.4 $38.8 $2.1 $0.9 $1.2 
Interest cost72.9 35.2 37.1 6.9 3.6 3.3 
Expected return on plan assets(79.7)(39.9)(41.5)(7.0)(5.0)(2.0)
Prior service cost1.3 1.2 0.6 0.3 0.3 
Recognized net actuarial (gain)/loss34.8 25.4 34.2 0.2 (0.4)
Settlement and special termination benefits10.0 12.7 
Net periodic benefit costs before regulatory adjustment and intercompany allocations98.5 42.3 81.9 2.5 (0.2)2.1 
Regulatory adjustment18.6 1.1 (9.2)(2.9)(2.1)(0.3)
Intercompany allocations(0.1)(17.0)0.1 (0.1)
Net periodic benefit costs (income)$117.1 $43.3 $55.7 $(0.4)$(2.2)$1.7 
Pension BenefitsPost-Retirement Benefits
Three Months Ended September 30, 2019EvergyEvergy Kansas CentralEvergy MetroEvergyEvergy Kansas CentralEvergy Metro
Components of net periodic benefit costs(millions)
Service cost$19.1 $7.3 $11.8 $0.6 $0.2 $0.4 
Interest cost27.5 13.4 14.1 2.6 1.4 1.2 
Expected return on plan assets(27.0)(13.7)(12.3)(2.5)(1.7)(0.8)
Prior service cost0.5 0.5 0.2 0.1 0.1 
Recognized net actuarial (gain)/loss6.9 6.2 12.2 (0.3)(0.1)(0.3)
Settlement and special termination benefits14.5 20.8 
Net periodic benefit costs before regulatory adjustment and intercompany allocations41.5 13.7 46.8 0.5 (0.1)0.5 
Regulatory adjustment4.9 0.5 (14.7)(0.8)(0.7)0.1 
Intercompany allocations(13.6)(0.2)
Net periodic benefit costs (income)$46.4 $14.2 $18.5 $(0.3)$(0.8)$0.4 
Pension BenefitsPost-Retirement Benefits
Year to Date September 30, 2019EvergyEvergy Kansas CentralEvergy MetroEvergyEvergy Kansas CentralEvergy Metro
Components of net periodic benefit costs(millions)
Service cost$57.3 $21.8 $35.5 $1.9 $0.8 $1.1 
Interest cost82.4 40.3 42.1 7.9 4.2 3.7 
Expected return on plan assets(80.9)(41.1)(36.9)(7.5)(5.0)(2.5)
Prior service cost1.5 1.3 0.7 0.3 0.3 
Recognized net actuarial (gain)/loss20.6 19.0 36.7 (0.9)(0.4)(1.1)
Settlement and special termination benefits14.5 20.8 
Net periodic benefit costs before regulatory adjustment and intercompany allocations95.4 41.3 98.9 1.7 (0.1)1.2 
Regulatory adjustment30.4 1.5 (15.9)(2.5)(2.2)0.3 
Intercompany allocations(27.6)(0.3)
Net periodic benefit costs (income)$125.8 $42.8 $55.4 $(0.8)$(2.3)$1.2 
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The components of net periodic benefit costs other than the service cost component are included in other expense on the Evergy Companies' consolidated statements of income and comprehensive income.
Year to date September 30, 2020, Evergy, Evergy Kansas Central and Evergy Metro made pension contributions of $54.3 million, $45.7 million and $8.6 million, respectively. Evergy expects to make additional pension contributions of $78.4 million in 2020 to satisfy the Employee Retirement Income Security Act of 1974, as amended (ERISA) funding requirements and KCC and MPSC rate orders, which is expected to be paid by Evergy Metro.
Year to date September 30, 2020, Evergy, Evergy Kansas Central and Evergy Metro made post-retirement benefit contributions of $0.6 million, $0.3 million and $0.3 million, respectively. Evergy, Evergy Kansas Central and Evergy Metro expect to make additional contributions in 2020 of $3.1 million, $0.4 million and $2.7 million, respectively, to the post-retirement benefit plans.
8. SHORT-TERM BORROWINGS AND SHORT-TERM BANK LINES OF CREDIT
Evergy's $2.5 billion master credit facility expires in 2023. Evergy, Evergy Kansas Central, Evergy Metro and Evergy Missouri West have borrowing capacity under the master credit facility with specific sublimits for each borrower. These sublimits can be unilaterally adjusted by Evergy for each borrower provided the sublimits remain within minimum and maximum sublimits as specified in the facility. A default by any borrower under the facility or one of its significant subsidiaries on other indebtedness totaling more than $100.0 million constitutes a default by that borrower under the facility. Under the terms of this facility, each of Evergy, Evergy Kansas Central, Evergy Metro and Evergy Missouri West is required to maintain a total indebtedness to total capitalization ratio, as defined in the facility, of not greater than 0.65 to 1.00 at all times. As of September 30, 2020, Evergy, Evergy Kansas Central, Evergy Metro and Evergy Missouri West were in compliance with this covenant.
The following table summarizes the committed credit facilities (excluding receivable sale facilities discussed in Note 3) available to the Evergy Companies as of September 30, 2020 and December 31, 2019.
Amounts Drawn
Master Credit FacilityCommercial PaperLetters of CreditCash BorrowingsAvailable BorrowingsWeighted Average Interest Rate on Short-Term Borrowings
September 30, 2020(millions)
Evergy, Inc.$450.0 n/a$0.7 $200.0 $249.3 1.42%
Evergy Kansas Central1,000.0 18.6 981.4 0%
Evergy Metro600.0 600.0 0%
Evergy Missouri West450.0 2.0 448.0 0%
Evergy$2,500.0 $$21.3 $200.0 $2,278.7 
December 31, 2019
Evergy, Inc.$450.0 n/a$0.7 $20.0 $429.3 2.99%
Evergy Kansas Central1,000.0 249.2 14.2 736.6 2.07%
Evergy Metro600.0 199.3 400.7 2.02%
Evergy Missouri West450.0 93.4 2.1 354.5 2.02%
Evergy$2,500.0 $541.9 $17.0 $20.0 $1,921.1 
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9. LONG-TERM DEBT
Mortgage Bonds
In April 2020, Evergy Kansas Central issued, at a discount, $500.0 million of 3.45% First Mortgage Bonds (FMBs), maturing in 2050 and issued a notice of redemption for its $250.0 million of 5.10% FMBs, which had an original maturity date of July 2020. The proceeds from the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs were used to redeem the $250.0 million of 5.10% FMBs in May 2020 and for general corporate purposes.
In May 2020, Evergy Metro issued, at a discount, $400.0 million of 2.25% Mortgage Bonds, maturing in 2030. The proceeds from the issuance of Evergy Metro's $400.0 million of 2.25% Mortgage Bonds were used to repay a portion of Evergy Metro's borrowings under the master credit facility and for general corporate purposes.
10. FAIR VALUE MEASUREMENTS
Values of Financial Instruments
GAAP establishes a hierarchical framework for disclosing the transparency of the inputs utilized in measuring assets and liabilities at fair value. Management's assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the classification of assets and liabilities within the fair value hierarchy levels. In addition, the Evergy Companies measure certain investments that do not have a readily determinable fair value at net asset value (NAV), which are not included in the fair value hierarchy. Further explanation of these levels and NAV is summarized below.
Level 1 – Quoted prices are available in active markets for identical assets or liabilities. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on public exchanges.
Level 2 –  Pricing inputs are not quoted prices in active markets but are either directly or indirectly observable. The types of assets and liabilities included in Level 2 are certain marketable debt securities, financial instruments traded in less than active markets or other financial instruments priced with models using highly observable inputs.
Level 3 – Significant inputs to pricing have little or no transparency. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation.
NAV - Investments that do not have a readily determinable fair value are measured at NAV. These investments do not consider the observability of inputs and, therefore, they are not included within the fair value hierarchy. The Evergy Companies include in this category investments in private equity, real estate and alternative investment funds that do not have a readily determinable fair value. The underlying alternative investments include collateralized debt obligations, mezzanine debt and a variety of other investments.
The Evergy Companies record cash and cash equivalents, accounts receivable and short-term borrowings on their consolidated balance sheets at cost, which approximates fair value due to the short-term nature of these instruments.
Interest Rate Derivatives
The Evergy Companies are exposed to market risks arising from changes in interest rates and may use derivative instruments to manage these risks. From time to time, risk management activities may include entering into interest rate swap agreements to protect against unfavorable interest rate changes relating to forecasted debt transactions. These interest rate swap agreements can be designated as cash flow hedges, in which case gains and losses on the interest rate swaps are deferred in other comprehensive income to be recognized as an adjustment to interest expense over the same period that the hedged interest payments affect earnings. The Evergy Companies classify all cash inflows and outflows for interest rate swap agreements accounted for as cash flow hedges of forecasted debt transactions as financing activities on their consolidated statements of cash flows.
In September 2019, Evergy issued $800.0 million of 2.90% Senior Notes maturing in 2029 and paid $69.8 million to settle an interest rate swap agreement with a notional amount of $500.0 million that was designated as a cash flow hedge of interest payments on the debt issuance. The $69.8 million pre-tax loss was recorded in accumulated
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other comprehensive loss on Evergy's consolidated balance sheet and is being reclassified to interest expense over the ten-year term of the debt. For the three months ended September 30, 2020, $1.8 million and ($0.4) million were reclassified from accumulated other comprehensive loss to interest expense and income tax expense, respectively, on Evergy's consolidated statements of comprehensive income. Year to date September 30, 2020, $5.3 million and ($3.6) million were reclassified from accumulated other comprehensive loss to interest expense and income tax expense, respectively, on Evergy's consolidated statements of comprehensive income. As of September 30, 2020, Evergy expects to amortize $5.3 million to earnings from accumulated other comprehensive loss over the next twelve months.
Fair Value of Long-Term Debt
The Evergy Companies measure the fair value of long-term debt using Level 2 measurements available as of the measurement date. The book value and fair value of the Evergy Companies' long-term debt and long-term debt of variable interest entities is summarized in the following table.
September 30, 2020December 31, 2019
Book ValueFair ValueBook ValueFair Value
Long-term debt(a)
(millions)
Evergy(b)
$9,629.9 $11,126.4 $8,997.8 $9,750.2 
Evergy Kansas Central3,931.1 4,711.5 3,686.1 4,078.8 
Evergy Metro2,922.7 3,555.6 2,525.0 2,932.2 
Long-term debt of variable interest entities(a)
Evergy$18.8 $19.3 $51.1 $51.5 
Evergy Kansas Central18.8 19.3 51.1 51.5 
(a) Includes current maturities.
(b) Book value as of September 30, 2020 and December 31, 2019, includes $114.1 million and $125.5 million, respectively, of fair value adjustments recorded in connection with purchase accounting for the Great Plains Energy and Evergy Kansas Central merger, which are not part of future principal payments and will amortize over the remaining life of the associated debt instrument.
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Recurring Fair Value Measurements
The following tables include the Evergy Companies' balances of financial assets and liabilities measured at fair value on a recurring basis.
DescriptionSeptember 30, 2020Level 1Level 2Level 3NAV
Evergy Kansas Central(millions)
Assets
Nuclear decommissioning trust(a)
Domestic equity funds$90.9 $83.5 $$$7.4 
International equity funds55.2 55.2 
Core bond fund39.6 39.6 
High-yield bond fund23.0 23.0 
Emerging markets bond fund18.8 18.8 
Combination debt/equity/other fund18.2 18.2 
Alternative investments fund20.2 20.2 
Real estate securities fund12.8 12.8 
Cash equivalents0.4 0.4 
Total nuclear decommissioning trust279.1 238.7 40.4 
Rabbi trust
Core bond fund25.3 25.3 
Combination debt/equity/other fund6.3 6.3 
Cash equivalents0.2 0.2 
Total rabbi trust31.8 0.2 31.6 
Total$310.9 $238.9 $$$72.0 
Evergy Metro
Assets    
Nuclear decommissioning trust(a)
    
Equity securities$208.0 $208.0 $$$
Debt securities
U.S. Treasury48.1 48.1 
U.S. Agency0.5 0.5 
State and local obligations3.7 3.7 
Corporate bonds40.9 40.9 
Foreign governments0.1 0.1 
Cash equivalents7.1 7.1 
Other
Total nuclear decommissioning trust308.4 263.2 45.2 
Self-insured health plan trust(b)
Equity securities1.1 1.1 
Debt securities8.6 3.2 5.4 
Cash and cash equivalents3.3 3.3 
Total self-insured health plan trust13.0 7.6 5.4 
Total$321.4 $270.8 $50.6 $$
Other Evergy
Assets
Rabbi trusts
Fixed income fund$13.1 $$$$13.1 
Cash and cash equivalents0.6 0.6 
Total rabbi trusts$13.7 $0.6 $$$13.1 
Evergy    
Assets    
Nuclear decommissioning trust(a)
$587.5 $501.9 $45.2 $$40.4 
Rabbi trusts45.5 0.8 44.7 
Self-insured health plan trust(b)
13.0 7.6 5.4 
Total$646.0 $510.3 $50.6 $$85.1 
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DescriptionDecember 31, 2019Level 1Level 2Level 3NAV
Evergy Kansas Central(millions)
Assets
Nuclear decommissioning trust(a)
Domestic equity funds$86.1 $78.6 $$$7.5 
International equity funds52.0 52.0 
Core bond fund39.3 39.3 
High-yield bond fund22.3 22.3 
Emerging markets bond fund19.4 19.4 
Combination debt/equity/other fund16.4 16.4 
Alternative investments fund23.9 23.9 
Real estate securities fund12.6 12.6 
Cash equivalents0.5 0.5 
Total nuclear decommissioning trust272.5 228.5 44.0 
Rabbi trust
Core bond fund25.3 25.3 
Combination debt/equity/other fund6.3 6.3 
Cash equivalents0.1 0.1 
Total rabbi trust31.7 0.1 31.6 
Total$304.2 $228.6 $$$75.6 
Evergy Metro
Assets    
Nuclear decommissioning trust(a)
   
Equity securities$211.1 $211.1 $$$
Debt securities     
U.S. Treasury50.3 50.3 
U.S. Agency0.4 0.4 
State and local obligations2.2 2.2 
Corporate bonds33.2 33.2 
Foreign governments0.1 0.1 
Cash equivalents3.1 3.1 
Other0.3 0.3 
Total nuclear decommissioning trust300.7 264.5 36.2 
Self-insured health plan trust(b)
Equity securities0.5 0.5 
Debt securities6.7 1.4 5.3 
Cash and cash equivalents2.7 2.7 
Total self-insured health plan trust9.9 4.6 5.3 
Total$310.6 $269.1 $41.5 $$
Other Evergy
Assets
Rabbi trusts
Fixed income fund$13.3 $$$$13.3 
Cash and cash equivalents0.5 0.5 
Total rabbi trusts$13.8 $0.5 $$$13.3 
Evergy    
Assets    
Nuclear decommissioning trust(a)
$573.2 $493.0 $36.2 $$44.0 
Rabbi trust45.5 0.6 44.9 
Self-insured health plan trust(b)
9.9 4.6 5.3 
Total$628.6 $498.2 $41.5 $$88.9 
(a)Fair value is based on quoted market prices of the investments held by the trust and/or valuation models.  
(b)Fair value is based on quoted market prices of the investments held by the trust. Debt securities classified as Level 1 are comprised of U.S. Treasury securities. Debt securities classified as Level 2 are comprised of corporate bonds, U.S. Agency, state and local obligations, and other asset-backed securities.
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Certain Evergy and Evergy Kansas Central investments included in the table above are measured at NAV as they do not have readily determinable fair values. In certain situations, these investments may have redemption restrictions.
The following table provides additional information on these Evergy and Evergy Kansas Central investments.
September 30, 2020December 31, 2019September 30, 2020
FairUnfundedFairUnfundedRedemptionLength of
ValueCommitmentsValueCommitmentsFrequencySettlement
Evergy Kansas Central(millions)
Nuclear decommissioning trust:
Domestic equity funds$7.4 $2.5 $7.5 $3.3 (a)(a)
Alternative investments fund(b)
20.2 23.9 Quarterly65 days
Real estate securities fund(b)
12.8 12.6 Quarterly65 days
Total$40.4 $2.5 $44.0 $3.3 
Rabbi trust:
Core bond fund$25.3 $$25.3 $(c)(c)
Combination debt/equity/other fund6.3 6.3 (c)(c)
Total$31.6 $$31.6 $
Other Evergy
Rabbi trust:
Fixed income fund$13.1 $$13.3 $(c)(c)
Total Evergy investments at NAV$85.1 $2.5 $88.9 $3.3 
(a)This investment is in 5 long-term private equity funds that do not permit early withdrawal. Investments in these funds cannot be distributed until the underlying investments have been liquidated, which may take years from the date of initial liquidation. NaN funds have begun to make distributions. The initial investment in the fourth and fifth funds occurred in 2016 and 2018, respectively. The fourth fund's term is 15 years, subject to the general partner's right to extend the term for up to 3 additional one-year periods.  The fifth fund's term is 15 years, subject to additional extensions approved by a fund advisory committee to provide for an orderly liquidation of fund investments and dissolution of the fund.
(b)There is a holdback on final redemptions.
(c)This investment can be redeemed immediately and is not subject to any restrictions on redemptions.
The Evergy Companies hold equity and debt investments classified as securities in various trusts including for the purposes of funding the decommissioning of Wolf Creek and for the benefit of certain retired executive officers of Evergy Kansas Central. The Evergy Companies record net realized and unrealized gains and losses on the nuclear decommissioning trusts in regulatory liabilities on their consolidated balance sheets and record net realized and unrealized gains and losses on the Evergy Companies' rabbi trusts in the consolidated statements of income and comprehensive income.
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The following table summarizes the net unrealized gains (losses) for the Evergy Companies' nuclear decommissioning trusts and rabbi trusts.
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
Evergy(millions)
Nuclear decommissioning trust - equity securities$27.5 $(0.3)$(8.5)$50.9 
Nuclear decommissioning trust - debt securities0.1 1.5 5.4 5.9 
Rabbi trusts - equity securities0.8 0.9 1.6 2.4 
Total$28.4 $2.1 $(1.5)$59.2 
Evergy Kansas Central
Nuclear decommissioning trust - equity securities$16.2 $0.2 $0.2 $26.2 
Rabbi trust - equity securities0.6 0.5 1.1 2.7 
Total$16.8 $0.7 $1.3 $28.9 
Evergy Metro
Nuclear decommissioning trust - equity securities$11.3 $(0.5)$(8.7)$24.7 
Nuclear decommissioning trust - debt securities0.1 1.5 5.4 5.9 
Total$11.4 $1.0 $(3.3)$30.6 
11. COMMITMENTS AND CONTINGENCIES
Environmental Matters
Set forth below are descriptions of contingencies related to environmental matters that may impact the Evergy Companies' operations or their financial results. Management's assessment of these contingencies, which are based on federal and state statutes and regulations, and regulatory agency and judicial interpretations and actions, has evolved over time. These laws, regulations, interpretations and actions can also change, restrict or otherwise impact the Evergy Companies' operations or financial results. The failure to comply with these laws, regulations, interpretations and actions could result in the assessment of administrative, civil and criminal penalties and the imposition of remedial requirements. The Evergy Companies believe that all of their operations are in substantial compliance with current federal, state and local environmental standards.
There are a variety of final and proposed laws and regulations that could have a material adverse effect on the Evergy Companies' operations and consolidated financial results. Due in part to the complex nature of environmental laws and regulations, the Evergy Companies are unable to assess the impact of potential changes that may develop with respect to the environmental contingencies described below.
Cross-State Air Pollution Update Rule
In September 2016, the Environmental Protection Agency (EPA) finalized the Cross-State Air Pollution (CSAPR) Update Rule. The final rule addresses interstate transport of nitrogen oxides emissions in 22 states including Kansas, Missouri and Oklahoma during the ozone season and the impact from the formation of ozone on downwind states with respect to the 2008 ozone National Ambient Air Quality Standards (NAAQS). In December 2018, the EPA finalized a determination, known as the CSAPR Close-Out Rule, demonstrating the CSAPR Update Rule fully addressed certain upwind states' 2008 ozone NAAQS interstate transport obligations. Various states and others have challenged both the CSAPR Update Rule and the CSAPR Close-Out Rule in the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit). In the fourth quarter of 2019, the D.C. Circuit granted these petitions and remanded a portion of the CSAPR Update Rule back to the EPA and vacated the CSAPR Close-Out Rule in its entirety.
In October 2020, the EPA issued a proposed rule to modify the CSAPR Update Rule. The proposed rule finds that nine of the states subject to the CSAPR Update Rule, including Kansas and Missouri, do not significantly contribute to downwind states' ability to achieve attainment during the ozone season. Evergy will continue to monitor this proposed rule as any changes to NOx ozone season allowances in the future could have a material impact on the Evergy Companies' operations and consolidated financial results.
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Greenhouse Gases
Burning coal and other fossil fuels releases carbon dioxide (CO2) and other gases referred to as greenhouse gases (GHG).  Various regulations under the federal Clean Air Act Amendments of 1990 (CAA) limit CO2 and other GHG emissions, and in addition, other measures are being imposed or offered by individual states, municipalities and regional agreements with the goal of reducing GHG emissions.
In August 2018, the EPA published in the Federal Register proposed regulations, which contained (1) emission guidelines for GHG emissions from existing electric utility generating units (EGUs), (2) revisions to emission guideline implementing regulations and (3) revisions to the new source review (NSR) program. These emission guidelines are better known as the Affordable Clean Energy (ACE) Rule. In July 2019, the EPA published in the Federal Register the final ACE Rule with one significant change from the proposal. The NSR program revisions were not included in the final version of the ACE Rule and are expected to be addressed in a future rulemaking. The ACE Rule establishes emission guidelines for states to use in the development of plans to reduce GHG emissions from existing coal-fired EGUs. This rule defines the "best system of emission reduction" (BSER) for GHG emissions from existing coal-fired EGUs as on-site, heat-rate efficiency improvements. The final rule also provides states with a list of candidate technologies that can be used to establish standards of performance and incorporate these performance standards into state plans. In order for the states to be able to effectively implement the emission guidelines contained in the ACE Rule, the EPA is finalizing new regulations under Section 111(d) of the CAA to help clarify this process. The ACE Rule became effective in September 2019. In conjunction with the finalization of the ACE Rule, the EPA repealed its previously adopted Clean Power Plan (CPP). Also, in September 2019, the D.C. Circuit granted motions to dismiss challenges to the CPP and challenges to EPA's denial of reconsideration of the CPP.
Due to uncertainty regarding what future state implementation plans will require for compliance with the ACE Rule as well as legal challenges that have been filed, the Evergy Companies cannot determine the impact of the rule on their operations or consolidated financial results, but the cost to comply with the ACE Rule, should it be upheld and implemented in its current or a substantially similar form, could be material.
Water
The Evergy Companies discharge some of the water used in generation and other operations containing substances deemed to be pollutants. A November 2015 EPA rule establishes effluent limitations guidelines (ELG) and standards for wastewater discharges, including limits on the amount of toxic metals and other pollutants that can be discharged. Implementation timelines for this 2015 rule vary from 2018 to 2023. In April 2019, the U.S. Court of Appeals for the 5th Circuit (5th Circuit) issued a ruling that vacates and remands portions of the original ELG rule. Due to this ruling, future ELG modifications for the best available technology economically achievable for the discharge of legacy wastewater and leachate are likely.
In October 2020, the EPA published the final ELG reconsideration rule. This rule adjusts numeric limits for flue gas desulfurization (FGD) wastewater and adds a 10% volumetric purge limit for bottom ash transport water. The timeline for final FGD wastewater compliance is now as soon as possible on or after one year following publication of the final rule in the Federal Register but no later than December 31, 2025. The Evergy Companies are in the process of reviewing the rule and the costs to comply with these changes could be material.
In October 2014, the EPA's final standards for cooling water intake structures at power plants to protect aquatic life took effect. The standards, based on Section 316(b) of the federal Clean Water Act (CWA), require subject facilities to choose among seven best available technology options to reduce fish impingement. In addition, some facilities must conduct studies to assist permitting authorities to determine whether and what site-specific controls, if any, would be required to reduce entrainment of aquatic organisms. The Evergy Companies' current analysis indicates this rule will not have a significant impact on their coal plants that employ cooling towers or cooling lakes that can be classified as closed cycle cooling and do not expect the impact from this rule to be material. Plants without closed cycle cooling are under evaluation for compliance with these standards and may require additional controls, the costs of which could be material.
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Evergy Metro holds a permit from the Missouri Department of Natural Resources (MDNR) covering water discharge from its Hawthorn Station.  The permit authorizes Evergy Metro to, among other things, withdraw water from the Missouri River for cooling purposes and return the heated water to the Missouri River.  Evergy Metro has applied for a renewal of this permit and the EPA has submitted an interim objection letter regarding the allowable amount of heat that can be contained in the returned water.  Until this matter is resolved, Evergy Metro continues to operate under its current permit. Evergy and Evergy Metro cannot predict the outcome of this matter; however, while less significant outcomes are possible, this matter may require a reduction in generation, installation of cooling towers or other technology to cool the water, or both, any of which could have a material impact on Evergy's and Evergy Metro's operations and consolidated financial results.
In April 2020, the U.S. District Court for the District of Montana (District Court of Montana) ruled that the U.S. Army Corps of Engineers' (Corps) reissuance of Nationwide Permit 12 (NWP 12) in 2017 violated the Endangered Species Act (ESA). The District Court of Montana determined that the Corps failed to initiate consultation under ESA to ensure that discharge activities under NWP 12 complied with the ESA. As a result, the District Court of Montana remanded NWP 12 to the Corps, vacated NWP 12 pending completion of the ESA consultation process and enjoined the Corps from authorizing any dredge or fill activities under NWP 12. The Evergy Companies utilize NWP 12 in the regulatory approval of various types of projects and the ruling and resulting actions of the Corps could have a material impact on the Evergy Companies' operations and consolidated financial results. In May 2020, the District Court of Montana amended the previous ruling such that the vacatur only applies to new oil and gas pipelines and that NWP 12 remains in place for non-pipeline activities, which would include activities performed by the Evergy Companies. The Corps followed that action with a request to the U.S. Supreme Court (Supreme Court) to stay the District Court of Montana's order.  In July 2020, the Supreme Court granted in part and denied in part the Corps' request to stay.  The Supreme Court ruled that the request was granted and the order stayed except as it applies to the Keystone XL pipeline.  As such, the original NWP 12 ruling would no longer apply to the Evergy Companies' activities and it is not believed that the ruling will have a material impact on the Evergy Companies’ operations and consolidated financial results.
Regulation of Coal Combustion Residuals
In the course of operating their coal generation plants, the Evergy Companies produce coal combustion residuals (CCRs), including fly ash, gypsum and bottom ash. The EPA published a rule to regulate CCRs in April 2015 that requires additional CCR handling, processing and storage equipment and closure of certain ash disposal units.
In March 2019, the D.C. Circuit issued a ruling to grant the EPA's request to remand the Phase I, Part I CCR rule in response to a prior court ruling requiring the EPA to address un-lined surface impoundment closure requirements. In August 2020, the EPA published the Part A CCR Rule. This rule reclassified clay-lined surface impoundments from "lined" to "un-lined" and established a deadline of April 11, 2021 to initiate closure. The prior rule included a deadline of October 31, 2020 for un-lined impoundments to initiate closure. In October 2020, the EPA released a pre-publication version of the final Part B CCR Rule. This rule includes a process to allow un-lined impoundments to continue to operate if a demonstration is made to prove that the un-lined impoundments are not adversely impacting groundwater, human health or the environment. The Evergy Companies are in the process of reviewing the Part A and Part B CCR rules and the costs to comply with these changes could be material.
The Evergy Companies have recorded AROs for their current estimates for the closure of ash disposal ponds, but the revision of these AROs may be required in the future due to changes in existing CCR regulations, the results of groundwater monitoring of CCR units or changes in interpretation of existing CCR regulations or changes in the timing or cost to close ash disposal ponds. If revisions to these AROs are necessary, the impact on the Evergy Companies' operations or consolidated financial results could be material.
Storage of Spent Nuclear Fuel
Under the Nuclear Waste Policy Act of 1982, the Department of Energy (DOE) is responsible for the permanent disposal of spent nuclear fuel. In 2010, the DOE filed a motion with the Nuclear Regulatory Commission (NRC) to withdraw its application to construct a national repository for the disposal of spent nuclear fuel and high-level radioactive waste at Yucca Mountain, Nevada. The NRC has not yet issued a final decision on the matter.
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Wolf Creek has elected to build a dry cask storage facility to expand its existing on-site spent nuclear fuel storage, which is expected to provide additional capacity in 2021. The Evergy Companies expect that the DOE will reimburse the majority of the costs to construct the dry cask storage facility that would not have otherwise been incurred had the DOE begun accepting spent nuclear fuel. The Evergy Companies cannot predict, when, or if, an off-site storage site or alternative disposal site will be available to receive Wolf Creek's spent nuclear fuel and will continue to monitor this activity.
12. RELATED PARTY TRANSACTIONS AND RELATIONSHIPS
In the normal course of business, Evergy Kansas Central, Evergy Metro and Evergy Missouri West engage in related party transactions with one another. A summary of these transactions and the amounts associated with them is provided below.
Jointly-Owned Plants and Shared Services
Employees of Evergy Kansas Central and Evergy Metro manage Evergy Missouri West's business and operate its facilities at cost, including Evergy Missouri West's 18% ownership interest in Evergy Metro's Iatan Nos. 1 and 2.  Employees of Evergy Kansas Central manage Jeffrey Energy Center (JEC) and operate its facilities at cost, including Evergy Missouri West's 8% ownership interest in JEC. Employees of Evergy Metro manage La Cygne Station and operate its facilities at cost, including Evergy Kansas Central's 50% interest in La Cygne Station. Employees of Evergy Metro and Evergy Kansas Central also provide one another with shared service support, including costs related to human resources, information technology, accounting and legal services.
The operating expenses and capital costs billed for jointly-owned plants and shared services are detailed in the following table.
Three Months Ended September 30Year to Date
September 30
2020201920202019
(millions)
Evergy Kansas Central billings to Evergy Missouri West$13.1 $4.5 $27.4 $17.2 
Evergy Metro billings to Evergy Missouri West46.5 41.6 121.8 125.8 
Evergy Kansas Central billings to Evergy Metro5.4 9.7 24.9 26.0 
Evergy Metro billings to Evergy Kansas Central26.9 33.0 94.5 108.8 
Money Pool
Evergy Metro and Evergy Missouri West are authorized to participate in the Evergy, Inc. money pool, which is an internal financing arrangement in which funds may be lent on a short-term basis to Evergy Metro and Evergy Missouri West from Evergy, Inc. and between Evergy Metro and Evergy Missouri West. At September 30, 2020, Evergy Metro had a $78.0 million outstanding receivable from Evergy Missouri West and 0 outstanding payables under the money pool. At December 31, 2019, Evergy Metro had 0 outstanding receivables or payables under the money pool.
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Related Party Net Receivables and Payables
The following table summarizes Evergy Kansas Central's and Evergy Metro's related party net receivables and payables.
September 30December 31
20202019
Evergy Kansas Central(millions)
Net receivable from (payable to) Evergy$(0.2)$6.9 
Net payable to Evergy Metro(15.4)(14.9)
Net receivable from Evergy Missouri West4.5 3.1 
Evergy Metro
Net receivable from (payable to) Evergy$16.1 $(4.3)
Net receivable from Evergy Kansas Central15.4 14.9 
Net receivable from Evergy Missouri West160.0 78.7 
Tax Allocation Agreement
Evergy files a consolidated federal income tax return as well as unitary and combined income tax returns in several state jurisdictions with Kansas and Missouri being the most significant. Income taxes for consolidated or combined subsidiaries are allocated to the subsidiaries based on separate company computations of income or loss. As of September 30, 2020 and December 31, 2019, Evergy Kansas Central had income taxes receivable from Evergy of $29.3 million and $37.9 million, respectively. As of September 30, 2020 and December 31, 2019, Evergy Metro had income taxes payable to Evergy of $0.6 million and $14.1 million, respectively.
Leases
Evergy Metro leases certain transmission equipment from Evergy Kansas Central. This lease was entered into prior to the merger in an arms-length transaction and is accounted for as an operating lease. The right-of-use asset related to this lease is recorded within other long-term assets and the current and long-term lease liabilities are recorded within other current liabilities and other long-term liabilities, respectively, on the consolidated balance sheet. The assets and liabilities related to this lease between Evergy Kansas Central and Evergy Metro are eliminated at consolidated Evergy. As of September 30, 2020, Evergy Metro had a right-of-use asset of $29.1 million, a current lease liability of $0.7 million and a long-term lease liability of $28.4 million on its consolidated balance sheet related to this lease. As of December 31, 2019, Evergy Metro had a right-of-use asset of $29.5 million, a current lease liability of $0.6 million and a long-term lease liability of $28.9 million on its consolidated balance sheet related to this lease.
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13. TAXES
Components of income tax expense are detailed in the following tables.
Evergy
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
Current income taxes(millions)
Federal$(16.4)$(31.2)$(35.0)$(10.6)
State(0.4)(0.8)(7.7)(1.6)
Total(16.8)(32.0)(42.7)(12.2)
Deferred income taxes  
Federal46.6 75.5 83.4 78.0 
State21.5 23.0 57.7 36.5 
Total68.1 98.5 141.1 114.5 
Investment tax credit amortization(1.3)(1.0)(4.6)(3.1)
Income tax expense$50.0 $65.5 $93.8 $99.2 
Evergy Kansas Central
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
Current income taxes(millions)
Federal$(4.6)$11.2 $7.5 $39.1 
State(6.4)(1.2)(13.3)(2.4)
Total(11.0)10.0 (5.8)36.7 
Deferred income taxes  
Federal17.9 4.6 (10.7)(9.3)
State16.6 12.0 169.4 21.1 
Total34.5 16.6 158.7 11.8 
Investment tax credit amortization(1.0)(0.8)(3.7)(2.3)
Income tax expense$22.5 $25.8 $149.2 $46.2 
Evergy Metro
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
Current income taxes(millions)
Federal$(8.9)$(2.2)$(8.4)$32.1 
State9.5 3.9 10.5 9.3 
Total0.6 1.7 2.1 41.4 
Deferred income taxes    
Federal22.2 26.3 38.9 1.4 
State2.6 4.5 (35.1)1.9 
Total24.8 30.8 3.8 3.3 
Investment tax credit amortization(0.3)(0.3)(0.8)(0.8)
Income tax expense$25.1 $32.2 $5.1 $43.9 
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Effective Income Tax Rates
Effective income tax rates reflected in the financial statements and the reasons for their differences from the statutory federal rates are detailed in the following tables.
Evergy
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
Federal statutory income tax rate21.0 %21.0 %21.0 %21.0 %
Effect of:
COLI policies(1.6)(1.6)(1.6)(1.7)
State income taxes3.5 4.0 3.4 3.9 
Flow through depreciation for plant-related differences(4.9)(3.1)(4.8)(3.2)
Federal tax credits(4.6)(3.9)(4.6)(3.9)
Non-controlling interest(0.3)(0.4)(0.3)(0.4)
AFUDC equity(0.2)(0.3)
Amortization of federal investment tax credits(0.7)(0.5)(0.7)(0.5)
Changes in uncertain tax positions, net(0.4)(0.3)
State tax rate change2.0 
Valuation allowance(0.4)(0.2)(1.1)
Stock compensation0.3 (0.1)0.2 
Officer compensation limitation0.2 0.1 0.2 0.1 
Other(0.5)— (0.3)
Effective income tax rate12.0 %15.0 %14.0 %13.8 %
Evergy Kansas Central
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
Federal statutory income tax rate21.0 %21.0 %21.0 %21.0 %
Effect of:
COLI policies(2.9)(2.8)(2.9)(3.0)
State income taxes2.3 4.4 2.9 4.2 
Flow through depreciation for plant-related differences(0.4)0.8 (0.2)0.5 
Federal tax credits(6.8)(6.2)(6.8)(6.1)
Non-controlling interest(0.7)(0.8)(0.6)(0.8)
AFUDC equity0.1 (0.1)(0.4)(0.1)
Amortization of federal investment tax credits(1.1)(0.7)(1.0)(0.7)
Changes in uncertain tax positions, net(0.9)(0.5)
State tax rate change32.0 
Valuation allowance(0.5)
Stock compensation(0.1)(0.1)
Other(1.4)(0.7)
Effective income tax rate11.5 %13.3 %43.9 %13.2 %
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Evergy Metro
Three Months Ended
September 30
Year to Date
September 30
2020201920202019
Federal statutory income tax rate21.0 %21.0 %21.0 %21.0 %
Effect of:
COLI policies(0.2)(0.1)(0.2)(0.1)
State income taxes5.5 3.6 4.5 3.2 
Flow through depreciation for plant-related differences(9.1)(6.1)(9.1)(6.1)
Federal tax credits(2.4)(1.3)(2.4)(1.4)
AFUDC equity(0.5)(0.3)
Amortization of federal investment tax credits(0.4)(0.3)(0.4)(0.3)
State tax rate change(11.4)
Stock compensation(0.4)
Officer compensation limitation0.5 0.3 0.5 0.3 
Other0.1 0.4 (0.4)
Effective income tax rate14.5 %17.5 %1.8 %16.2 %
Tax Reform
In May 2020, the state of Kansas exempted certain public utilities, including Evergy Kansas Central and Evergy Metro, from Kansas corporate income tax beginning in 2021 and authorized the KCC to approve changes in rates related to increases or decreases in federal or state income tax rates.
As a result of the exemption from Kansas corporate income tax, the Evergy Companies revalued their deferred income tax assets and liabilities in May 2020. Evergy decreased its net deferred income tax liabilities by $233.8 million, primarily consisting of a $400.4 million adjustment for the revaluation of deferred income tax assets and liabilities included in rate base and a $31.7 million tax gross-up adjustment on this amount for ratemaking purposes and $13.8 million of income tax expense primarily related to the revaluation of deferred income taxes that will not be recovered from customers in future rates; partially offset by a decrease to unamortized investment tax credits of $183.6 million due to the revaluation of certain Kansas income tax credits and a $16.9 million tax gross-up adjustment on this amount for ratemaking purposes.
Evergy Kansas Central decreased its net deferred income tax liabilities by $17.6 million, primarily consisting of a $293.7 million adjustment for the revaluation of deferred income tax assets and liabilities included in rate base and a $17.3 million tax gross-up adjustment on this amount for ratemaking purposes; partially offset by a decrease to unamortized investment tax credits of $183.6 million due to the revaluation of certain Kansas income tax credits and a $16.9 million tax gross-up adjustment on this amount for ratemaking purposes and $109.0 million of income tax expense primarily related to the revaluation of deferred income taxes that will not be recovered from customers in future rates.
Evergy Metro decreased its net deferred income tax liabilities by $152.9 million, primarily consisting of a $106.7 million adjustment for the revaluation of deferred income tax assets and liabilities included in rate base and a $14.4 million tax gross-up adjustment on this amount for ratemaking purposes and $32.2 million of income tax benefit primarily related to the revaluation of deferred income taxes that will not be refunded to customers in future rates.
The changes to the Evergy Companies' net deferred income tax liabilities included in rate base were offset by corresponding changes in regulatory liabilities. The net regulatory liabilities will be refunded to customers in future rates by amortizing the amounts related to plant assets over the remaining useful life of the assets, and amortizing the amounts related to other items over a period to be determined in a future rate case. The changes to the Evergy Companies' unamortized investment tax credits were related to the portion of certain Kansas income tax credits that are not expected to be used after December 31, 2020. The amounts of income tax expense (benefit) recognized by the Evergy Companies related to the revaluation of deferred income taxes that will not be recovered from or
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refunded to customers in future rates primarily pertain to deferred tax adjustments related to the difference between Evergy's consolidated tax rate and the statutory tax rates used for setting rates at Evergy Kansas Central, Evergy Metro and Evergy Missouri West as well as deferred income tax adjustments related to non-regulated operations.
Evergy Kansas Central and Evergy Metro currently recover the cost of Kansas corporate income taxes in rates from their customers at the statutory rate of 7% that will be effective until 2021, when the income tax exemption established by the state of Kansas takes effect. In accordance with the provisions of the income tax exemption, Evergy Metro and Evergy Kansas Central filed a joint application with the KCC in July 2020 to reduce their retail rates to reflect their exemption from Kansas corporate income taxes. In the joint application, Evergy Metro requested to implement its rate reduction in one phase, effective January 1, 2021, and Evergy Kansas Central requested to implement its rate reduction in three phases, effective January 1 in each of 2021, 2022 and 2023. A decision on the joint application from the KCC is expected in the fourth quarter of 2020.
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following combined Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the consolidated financial statements and accompanying notes in this combined Quarterly Report on Form 10-Q and the Evergy Companies' combined 2019 Form 10-K. None of the registrants make any representation as to information related solely to Evergy, Evergy Kansas Central or Evergy Metro other than itself.
EVERGY, INC.
EXECUTIVE SUMMARY
Evergy is a public utility holding company incorporated in 2017 and headquartered in Kansas City, Missouri. Evergy operates primarily through the following wholly-owned direct subsidiaries listed below.
Evergy Kansas Central is an integrated, regulated electric utility that provides electricity to customers in the state of Kansas. Evergy Kansas Central has one active wholly-owned subsidiary with significant operations, Evergy Kansas South.
Evergy Metro is an integrated, regulated electric utility that provides electricity to customers in the states of Missouri and Kansas.
Evergy Missouri West is an integrated, regulated electric utility that provides electricity to customers in the state of Missouri.
Evergy Transmission Company owns 13.5% of Transource with the remaining 86.5% owned by AEP Transmission Holding Company, LLC, a subsidiary of AEP. Transource is focused on the development of competitive electric transmission projects. Evergy Transmission Company accounts for its investment in Transource under the equity method.
Evergy Kansas Central also owns a 50% interest in Prairie Wind, which is a joint venture between Evergy Kansas Central and subsidiaries of AEP and Berkshire Hathaway Energy Company. Prairie Wind owns a 108-mile, 345 kV double-circuit transmission line that provides transmission service in the SPP. Evergy Kansas Central accounts for its investment in Prairie Wind under the equity method.
Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West conduct business in their respective service territories using the name Evergy. Collectively, the Evergy Companies have approximately 14,700 MWs of owned generating capacity and renewable purchased power agreements and engage in the generation, transmission, distribution and sale of electricity to approximately 1.6 million customers in the states of Kansas and Missouri. The Evergy Companies assess financial performance and allocate resources on a consolidated basis (i.e., operate in one segment).
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Strategy
Evergy expects to continue operating its integrated utilities within the currently existing regulatory frameworks. In March 2020, the Evergy Board announced the creation of a Strategic Review & Operations Committee, whose mandate was to explore ways to enhance long-term shareholder value (taking into account applicable legal and regulatory requirements and any other relevant considerations), including through a potential strategic combination or an enhanced long-term standalone operating plan and strategy. The committee completed its review and unanimously recommended to the Evergy Board that Evergy pursue an enhanced long-term standalone operating plan and strategy and the Evergy Board subsequently unanimously concurred with the recommendation. This "Sustainability Transformation Plan" is a five-year plan to optimize and enhance value creation for shareholders, customers, communities and employees. Significant elements of the plan include:
targeting a reduction of approximately $330 million of operating and maintenance expense by 2024 from 2018 adjusted operating and maintenance expense (non-GAAP) (see "Non-GAAP Measures" within this Executive Summary for a reconciliation of this non-GAAP measure to the most comparable GAAP measure);
targeting a reduction of approximately $145 million of fuel and purchased power expense between 2019 and 2024; and
approximately $8.9 billion of expected base capital investments through 2024, or $1.4 billion more than Evergy's prior plan. Of this amount, Evergy expects approximately $2.8 billion to qualify for plant-in-service accounting in Missouri, and approximately $1.8 billion to be focused on FERC-jurisdictional improvements. See "Liquidity and Capital Resources; Capital Expenditures", for further information regarding Evergy's projected capital expenditures through 2024.
The plan also enhances Evergy's efforts to mitigate future strategic risk through responsible, accelerated decarbonization. Evergy has already reduced carbon dioxide emissions by 45% from 2005 levels and, earlier in 2020 Evergy announced a goal to achieve an 80% reduction from 2005 levels by 2050. The Sustainability Transformation Plan has the potential to reduce carbon dioxide emissions 85% by 2030 compared to 2005 levels. The new plan expedites carbon dioxide emission reductions by pursuing constructive regulatory recovery mechanisms that would be necessary to economically retire aging, coal-fired generation and expanding Evergy's wind and solar footprint. The pace of decarbonization will ultimately be defined in continued collaboration with stakeholders, including in the remainder of 2020 as part of Evergy's triennial integrated resource plan.
See "Cautionary Statements Regarding Certain Forward-Looking Information" and Part II, Item 1A, Risk Factors, for additional information.
Impact of COVID-19
The COVID-19 pandemic has had, and may continue to have, a significant impact on the way that the Evergy Companies conduct their operations, including the implementation of social distancing and other preventative protocols and the direction of employees to work remotely when possible. Further, the spread of COVID-19 has resulted in efforts to contain the virus, such as quarantines, restrictions on travel, closures and the reduced operations of businesses, governmental agencies and other institutions. The pandemic, along with the efforts to contain the virus, has caused and could continue to cause an economic slowdown or recession, result in significant disruptions or reductions in various public, commercial or industrial activities and cause employee absences. In the states of Missouri and Kansas as well as certain counties and municipalities within the Evergy Companies' service territory, "stay-at-home" orders were in effect for substantially all of April 2020 and expired in early May 2020.
Following the expiration of the "stay-at-home" orders in early May 2020, much of the Evergy Companies' service territory was subject to phased reopening guidelines that limited the operations of businesses, governmental agencies and other institutions. Certain of these restrictions continue to remain in effect and a substantial portion of the Evergy Companies' service territory is also now required to utilize preventative measures such as the wearing of face coverings while in public areas. Management cannot foresee whether the outbreak of COVID-19 will be effectively contained, nor can it predict the severity and duration of its impact.
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During 2020, Evergy has experienced an overall reduction in demand and the shifting of usage away from customers with relatively higher load requirements, such as industrial and commercial customers, towards customers with relatively lower load requirements, such as residential customers. Year to date September 30, 2020, approximately 40% of Evergy's total revenues came from residential customers and approximately 45% came from commercial and industrial customers, compared with approximately 37% from residential customers and 47% from commercial and industrial customers in 2019. The KCC and MPSC have established different prices for the Evergy Companies' residential, commercial and industrial customers and a similar change in demand across each customer class will have a different impact on earnings. Management estimates that a 1% change in demand for residential, commercial and industrial customers will impact Evergy's 2020 earnings by approximately $10 million, $8 million and $2 million, respectively. As a result, the impacts to Evergy's earnings from a reduction in demand from industrial and commercial customers have been partially offset by an increase in demand from residential customers.
The Evergy Companies have also temporarily implemented policies, and in the future may implement additional policies, that are intended to ease the financial burden of the pandemic on customers. These policies, such as temporarily extending payment options and offering incentives for customer payments on overdue balances as well as the elimination of late payment fees and disconnections for non-payment through July 15, 2020, could lead to lower levels of operating cash flows compared to historical levels for the Evergy Companies. In addition, these policies, along with lower electric sales as a result of the overall reduction in demand discussed above, could also lead to the additional repayment of portions of the Evergy Companies' borrowings under receivable sale facilities.
Finally, the Evergy Companies have incurred, and will continue to incur, expenses related to monitoring the COVID-19 pandemic and modifying operations in response to the pandemic that are recorded in operating and maintenance expense.
In May 2020, Evergy Kansas Central, Evergy Metro and Evergy Missouri West filed joint requests for AAOs with the KCC and MPSC, as applicable, that would allow for the extraordinary costs and lost revenues incurred by the companies, net of any COVID-19-related savings, as a result of the COVID-19 pandemic to be considered for future recovery from customers as part of their next rate cases.  The KCC approved the AAO request in July 2020.

In October 2020, Evergy Metro and Evergy Missouri West entered into a non-unanimous stipulation and agreement with the MPSC staff and other intervenors that would allow Evergy Metro and Evergy Missouri West to defer to a regulatory asset certain net incremental costs incurred associated with the COVID-19 pandemic for consideration in their next rate cases. A decision by the MPSC regarding the non-unanimous stipulation and agreement is expected in January 2021.
Evergy's management is actively monitoring, and will continue to monitor, the evolving impact of COVID-19 on its results of operations and any developments affecting its workforce and suppliers and will take additional actions as it believes are warranted. The situation is changing rapidly and future impacts may materialize that are not yet known. Accordingly, the extent to which COVID-19 and the factors noted above may impact the results of operations, financial condition, cash flows and liquidity of the Evergy Companies will depend on future developments that are highly uncertain and cannot be predicted, including new information concerning the severity and duration of the COVID-19 outbreak and the actions taken to contain it or to seek recovery of its impact, among others.
See "Cautionary Statements Regarding Certain Forward-Looking Information" and Part II, Item 1A, Risk Factors, for additional information.
Regulatory Proceedings
See Note 4 to the consolidated financial statements for information regarding regulatory proceedings.
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Earnings Overview
The following table summarizes Evergy's net income and diluted EPS.
Three Months Ended
September 30
Year to Date
September 30
2020Change20192020Change2019
(millions, except per share amounts)
Net income attributable to Evergy, Inc.$364.5 $(2.3)$366.8 $567.3 $(38.7)$606.0 
Earnings per common share, diluted1.60 0.04 1.56 2.49 — 2.49 
Net income attributable to Evergy, Inc. decreased for the three months ended September 30, 2020, compared to the same period in 2019, primarily due to lower retail sales driven by unfavorable weather that were partially offset by an increase in weather-normalized residential demand; partially offset by lower operating and maintenance expenses in 2020; and lower income tax expense primarily due to lower pre-tax income and lower deferred income tax expense on temporary differences due to the change in the Kansas corporate income tax rate.
Diluted EPS increased for the three months ended September 30, 2020, compared to the same period in 2019, primarily due to a lower number of diluted weighted average common shares outstanding in 2020, which increased EPS by $0.05 for the three months ended September 30, 2020.
Net income attributable to Evergy, Inc. decreased year to date September 30, 2020, compared to the same period in 2019, primarily due to lower retail sales driven by unfavorable weather and a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures as a result of COVID-19 that were partially offset by an increase in weather-normalized residential demand; higher depreciation expense; and higher interest expense; partially offset by lower operating and maintenance expenses in 2020 and lower income tax expense primarily due to lower pre-tax income partially offset by impacts from the Kansas corporate income tax rate change.
Diluted EPS was impacted year to date September 30, 2020, compared to the same period in 2019, by a lower number of diluted weighted average common shares outstanding in 2020, which increased EPS by $0.16 year to date September 30, 2020.
For additional information regarding the change in net income, refer to the Evergy Results of Operations section within this MD&A.
Adjusted Earnings (non-GAAP) and Adjusted EPS (non-GAAP)
Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) for the three months ended and year to date September 30, 2020, were $393.3 million or $1.73 per share and $641.7 million or $2.82 per share, respectively. For the three months ended and year to date September 30, 2019, Evergy's adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) were $369.8 million or $1.57 per share and $621.2 million or $2.55 per share, respectively. In addition to net income attributable to Evergy, Inc. and diluted EPS, Evergy's management uses adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) to evaluate earnings and EPS without the costs resulting from rebranding, voluntary severance, advisor expenses and the revaluation of deferred tax assets and liabilities from the Kansas corporate income tax rate change.
Non-GAAP Measures
Adjusted Earnings and Adjusted EPS
Adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are intended to enhance an investor's overall understanding of results. Adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are used internally to measure performance against budget and in reports for management and the Evergy Board. Adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP) are financial measures that are not calculated in accordance with GAAP and may not be comparable to other companies' presentations or more useful than the GAAP information provided elsewhere in this report.
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The following tables provide a reconciliation between net income attributable to Evergy, Inc. and diluted EPS as determined in accordance with GAAP and adjusted earnings (non-GAAP) and adjusted EPS (non-GAAP).
Earnings (Loss)Earnings (Loss) per Diluted ShareEarnings (Loss)Earnings (Loss) per Diluted Share
Three Months Ended September 3020202019
(millions, except per share amounts)
Net income attributable to Evergy, Inc.$364.5 $1.60 $366.8 $1.56 
Non-GAAP reconciling items:
Rebranding costs, pre-tax(a)
— — 3.6 0.01 
Voluntary severance costs, pre-tax(b)
28.7 0.13 0.4 — 
Advisor expenses, pre-tax(c)
9.7 0.04 — — 
Income tax benefit(d)
(9.6)(0.04)(1.0)— 
Adjusted earnings (non-GAAP)$393.3 $1.73 $369.8 $1.57 
Earnings (Loss)Earnings (Loss) per Diluted ShareEarnings (Loss)Earnings (Loss) per Diluted Share
Year to Date September 3020202019
(millions, except per share amounts)
Net income attributable to Evergy, Inc.$567.3 $2.49 $606.0 $2.49 
Non-GAAP reconciling items:
Rebranding costs, pre-tax(a)
— — 4.7 0.02 
Voluntary severance costs, pre-tax(b)
55.3 0.24 15.1 0.06 
Advisor expenses, pre-tax(c)
26.1 0.12 — — 
Income tax benefit(d)
(20.8)(0.09)(4.6)(0.02)
Kansas corporate income tax change(e)
13.8 0.06 — — 
Adjusted earnings (non-GAAP)$641.7 $2.82 $621.2 $2.55 
(a)Reflects external costs incurred to rebrand the legacy Westar Energy and KCP&L utility brands to Evergy and are included in operating and maintenance expense on the consolidated statements of comprehensive income.
(b)Reflects severance costs incurred associated with certain voluntary severance programs at the Evergy Companies and are included in operating and maintenance expense on the consolidated statements of comprehensive income.
(c)Reflects advisor expenses incurred associated with strategic planning and are included in operating and maintenance expense on the consolidated statements of comprehensive income.
(d)Reflects an income tax effect calculated at a statutory rate of approximately 26%, with the exception of certain non-deductible items.
(e)Reflects the revaluation of Evergy Kansas Central's, Evergy Metro's and Evergy Missouri West's deferred income tax assets and liabilities from the Kansas corporate income tax rate change and are included in income tax expense on the consolidated statements of comprehensive income.
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2018 Adjusted Operating and Maintenance Expense
The following table provides a reconciliation between 2018 operating and maintenance expense and 2018 pro forma operating and maintenance expense as determined in accordance with GAAP and 2018 adjusted operating and maintenance expense (non-GAAP).
(millions)
2018 Operating and maintenance expense$1,115.8 
Pro forma adjustments(a):
Great Plains Energy operating and maintenance expense prior to the merger317.9 
Non-recurring merger costs and other(101.3)
2018 Pro forma operating and maintenance expense$1,332.4 
Non-GAAP reconciling items:
Voluntary severance costs(b)
(23.5)
Deferral of merger transition costs(c)
28.5 
Inventory write-offs at retiring generating units(d)
(31.0)
2018 Adjusted operating and maintenance expense (non-GAAP)$1,306.4 
(a)Reflects pro forma adjustments made in accordance with Article 11 of Regulation S-X and ASC 805 - Business Combinations. See Note 2 to the consolidated financial statements in the Evergy Companies' combined 2018 annual report on Form 10-K for further information regarding these adjustments.
(b)Reflects severance costs incurred associated with certain voluntary severance programs at the Evergy Companies and are included in operating and maintenance expense on the 2018 consolidated statements of comprehensive income in the Evergy Companies' combined 2018 annual report on Form 10-K.
(c)Reflects the portion of the $47.8 million deferral of merger transition costs to a regulatory asset in June 2018 that related to costs incurred prior to 2018. The remaining merger transition costs included within the $47.8 million deferral were both incurred and deferred in 2018 and did not impact earnings. This item is included in operating and maintenance expense on the 2018 consolidated statements of comprehensive income in the Evergy Companies' combined 2018 annual report on Form 10-K.
(d)Reflects obsolete inventory write-offs for Evergy Kansas Central's Unit 7 at Tecumseh Energy Center, Units 3 and 4 at Murray Gill Energy Center, Units 1 and 2 at Gordon Evans Energy Center, Evergy Metro's Montrose Station and Evergy Missouri West's Sibley Station and are included in operating and maintenance expense on the 2018 consolidated statements of comprehensive income in the Evergy Companies' combined 2018 annual report on Form 10-K.
ENVIRONMENTAL MATTERS
See Note 11 to the consolidated financial statements for information regarding environmental matters.
RELATED PARTY TRANSACTIONS
See Note 12 to the consolidated financial statements for information regarding related party transactions.
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EVERGY RESULTS OF OPERATIONS 
The following table summarizes Evergy's comparative results of operations.
Three Months Ended
September 30
Year to Date
September 30
2020Change20192020Change2019
 (millions)
Operating revenues$1,517.6 $(60.0)$1,577.6 $3,819.0 $(197.2)$4,016.2 
Fuel and purchased power316.2 (41.1)357.3 832.5 (146.4)978.9 
SPP network transmission costs66.1 3.7 62.4 197.8 9.1 188.7 
Operating and maintenance304.6 (7.0)311.6 865.5 (41.6)907.1 
Depreciation and amortization218.0 1.9 216.1 658.1 13.0 645.1 
Taxes other than income tax91.0 (0.5)91.5 274.2 (2.2)276.4 
Income from operations521.7 (17.0)538.7 990.9 (29.1)1,020.0 
Other expense, net(11.3)3.8 (15.1)(36.7)(4.2)(32.5)
Interest expense94.8 4.0 90.8 290.5 13.2 277.3 
Income tax expense50.0 (15.5)65.5 93.8 (5.4)99.2 
Equity in earnings of equity method investees, net of income taxes1.9 (1.7)3.6 6.1 (1.8)7.9 
Net income367.5 (3.4)370.9 576.0 (42.9)618.9 
Less: Net income attributable to noncontrolling interests3.0 (1.1)4.1 8.7 (4.2)12.9 
Net income attributable to Evergy, Inc.$364.5 $(2.3)$366.8 $567.3 $(38.7)$606.0 

Evergy Utility Gross Margin and MWh Sales
Utility gross margin is a financial measure that is not calculated in accordance with GAAP.  Utility gross margin, as used by the Evergy Companies, is defined as operating revenues less fuel and purchased power costs and amounts billed by the SPP for network transmission costs. Expenses for fuel and purchased power costs, offset by wholesale sales margin, are subject to recovery through cost adjustment mechanisms.  As a result, changes in fuel and purchased power costs are offset in operating revenues with minimal impact on net income. In addition, SPP network transmission costs fluctuate primarily due to investments by SPP members for upgrades to the transmission grid within the SPP RTO.  As with fuel and purchased power costs, changes in SPP network transmission costs are mostly reflected in the prices charged to customers with minimal impact on net income.
Management believes that utility gross margin provides a meaningful basis for evaluating the Evergy Companies' operations across periods because utility gross margin excludes the revenue effect of fluctuations in these expenses.  Utility gross margin is used internally to measure performance against budget and in reports for management and the Evergy Board.  Utility gross margin should be viewed as a supplement to, and not a substitute for, income from operations, which is the most directly comparable financial measure prepared in accordance with GAAP. The Evergy Companies' definition of utility gross margin may differ from similar terms used by other companies.
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The following tables summarize Evergy's utility gross margin and MWhs sold and provide a reconciliation of utility gross margin to income from operations.
 Revenues and ExpensesMWhs Sold
Three Months Ended September 302020Change20192020Change2019
Retail revenues(millions)(thousands)
Residential$636.4 $(16.6)$653.0 4,813 (124)4,937 
Commercial499.5 (39.6)539.1 4,914 (337)5,251 
Industrial166.8 (8.5)175.3 2,273 (99)2,372 
Other retail revenues9.5 (6.5)16.0 34 — 34 
Total electric retail1,312.2 (71.2)1,383.4 12,034 (560)12,594 
Wholesale revenues85.0 (11.3)96.3 3,507 (177)3,684 
Transmission revenues80.7 0.3 80.4 N/AN/AN/A
Other revenues39.7 22.2 17.5 N/AN/AN/A
Operating revenues1,517.6 (60.0)1,577.6 15,541 (737)16,278 
Fuel and purchased power(316.2)41.1 (357.3)
SPP network transmission costs(66.1)(3.7)(62.4)
Utility gross margin (a)
1,135.3 (22.6)1,157.9 
Operating and maintenance(304.6)7.0 (311.6)
Depreciation and amortization(218.0)(1.9)(216.1)
Taxes other than income tax(91.0)0.5 (91.5)
Income from operations$521.7 $(17.0)$538.7 
 Revenues and ExpensesMWhs Sold
Year to Date September 302020Change20192020Change2019
Retail revenues(millions)(thousands)
Residential$1,515.6 $(20.7)$1,536.3 12,114 (49)12,163 
Commercial1,272.9 (118.3)1,391.2 12,974 (1,035)14,009 
Industrial446.7 (32.2)478.9 6,171 (357)6,528 
Other retail revenues29.2 (6.1)35.3 99 (6)105 
Total electric retail3,264.4 (177.3)3,441.7 31,358 (1,447)32,805 
Wholesale revenues195.8 (55.9)251.7 10,242 (630)10,872 
Transmission revenues238.5 5.0 233.5 N/AN/AN/A
Other revenues120.3 31.0 89.3 N/AN/AN/A
Operating revenues3,819.0 (197.2)4,016.2 41,600 (2,077)43,677 
Fuel and purchased power(832.5)146.4 (978.9)
SPP network transmission costs(197.8)(9.1)(188.7)
Utility gross margin (a)
2,788.7 (59.9)2,848.6 
Operating and maintenance(865.5)41.6 (907.1)
Depreciation and amortization(658.1)(13.0)(645.1)
Taxes other than income tax(274.2)2.2 (276.4)
Income from operations$990.9 $(29.1)$1,020.0 
(a) Utility gross margin is a non-GAAP financial measure.  See explanation of utility gross margin above.
Evergy's utility gross margin decreased $22.6 million for the three months ended September 30, 2020, compared to the same period in 2019, driven by:
a $33.3 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased 17%), partially offset by an increase in weather-normalized residential demand; partially offset by
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a $3.9 million increase in revenue recognized for the Missouri Energy Efficiency Investment Act (MEEIA) earnings opportunity in 2020 related to the achievement of certain customer energy savings levels in the second cycle of Evergy Metro's and Evergy Missouri West's MEEIA programs;
a $3.8 million decrease in the amount of revenue deferred in the third quarter of 2020 related to the granting of an AAO by the MPSC in October 2019 requiring Evergy Missouri West to record a regulatory liability for the estimated amount of revenues it has collected from customers for certain costs related to Sibley Station since its retirement in November 2018 as the amount of revenues deferred in the third quarter of 2019 included revenues collected for costs related to Sibley Station since its retirement from November 2018 to September 2019; and
a $3.0 million increase in Evergy Metro's and Evergy Missouri West's MEEIA throughput disincentive in 2020 primarily driven by the cumulative amount of customer energy savings achieved in the second and third cycles of Evergy Metro's and Evergy Missouri West's MEEIA programs.
Evergy's utility gross margin decreased $59.9 million year to date September 30, 2020, compared to the same period in 2019, driven by:
a $64.9 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased 7% and heating degree days decreased 11%) and a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19, partially offset by an increase in weather-normalized residential demand;
a $2.3 million decrease related to Evergy Kansas Central's and Evergy Metro's TDC riders in 2020; and
a $5.7 million decrease in revenue recognized for the MEEIA earnings opportunity in 2020 related to the achievement of certain customer energy savings levels in the second cycle of Evergy Metro's and Evergy Missouri West's MEEIA programs; partially offset by
a $7.0 million increase for recovery of programs costs for energy efficiency programs under MEEIA in 2020, which have a direct offset in operating and maintenance expense; and
a $6.0 million increase in Evergy Metro's and Evergy Missouri West's MEEIA throughput disincentive in 2020 primarily driven by the cumulative amount of customer energy savings achieved in the second and third cycles of Evergy Metro's and Evergy Missouri West's MEEIA programs.
Operating and Maintenance
Evergy's operating and maintenance expense decreased $7.0 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily driven by:
a $19.7 million decrease in various administrative and general operating and maintenance expenses primarily driven by a $7.9 million decrease in credit loss expense primarily due to lower levels of customer disconnections in 2020 at Evergy Metro and a $7.8 million decrease in labor and employee benefits expense that included lower employee headcount in 2020;
a $10.2 million decrease in plant operating and maintenance expense at fossil-fuel generating units primarily due to an $8.4 million write-off of a regulatory asset for costs incurred during the JEC lease extension in the third quarter of 2019 and lower employee headcount in 2020;
an $8.1 million decrease in transmission and distribution operating and maintenance expense primarily due to lower labor expense in 2020 and a $2.6 million decrease primarily due to the timing of vegetation management projects at Evergy Kansas Central and Evergy Metro in 2020; and
$4.7 million of external costs incurred to rebrand the legacy Westar and KCP&L utility brands to Evergy in the third quarter of 2019; partially offset by
a $28.0 million increase in voluntary severance expenses at Evergy Kansas Central, Evergy Metro and Evergy Missouri West primarily related to Evergy voluntary exit programs in 2020; and
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$9.7 million of advisor expenses incurred in the third quarter of 2020 by Evergy associated with strategic planning.
Evergy's operating and maintenance expense decreased $41.6 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
a $38.2 million decrease in plant operating and maintenance expense at fossil-fuel generating units primarily due to:
a $23.4 million decrease at Evergy Kansas Central primarily driven by an $11.2 million decrease from maintenance outages at JEC Unit 2 and La Cygne Unit 2 in the first half of 2019, an $8.4 million write-off of a regulatory asset for costs incurred during the JEC lease extension in the third quarter of 2019 and lower employee headcount in 2020; and
a $10.8 million decrease at Evergy Metro primarily driven by a $10.6 million decrease from outages at Hawthorn Station, Iatan Station and La Cygne Unit 2 and lower employee headcount in 2020;
a $33.9 million decrease in transmission and distribution operating and maintenance expense primarily due to $13.1 million of costs at Evergy Metro and Evergy Missouri West incurred from storms that occurred in January 2019, a $2.7 million decrease due to the timing of vegetation management projects at Evergy Kansas Central and Evergy Metro in 2020 and lower labor expense in 2020;
a $28.9 million decrease in various administrative and general operating and maintenance expenses primarily driven by:
a $12.0 million decrease in labor and employee benefits expense that included lower employee headcount in 2020;
a $6.9 million decrease in credit loss expense primarily due to lower levels of customer disconnections in 2020 at Evergy Metro; and
a $3.7 million decrease in property insurance expense due to a higher annual refund of nuclear insurance premiums received by Evergy Kansas Central and Evergy Metro in 2020 related to their ownership interest in Wolf Creek; and
$4.7 million of external costs incurred to rebrand the legacy Westar and KCP&L utility brands to Evergy in 2019; partially offset by
a $39.4 million increase in voluntary severance expenses due to a $32.6 million increase at Evergy Kansas Central, Evergy Metro and Evergy Missouri West related to Evergy voluntary exit programs in 2020 and $6.8 million of voluntary severance expenses incurred in 2020 by Evergy Kansas Central and Evergy Metro related to Wolf Creek voluntary exit programs;
$26.1 million of advisor expenses incurred in 2020 by Evergy associated with strategic planning; and
a $7.0 million increase in program costs for energy efficiency programs under MEEIA in 2020, which have a direct offset in revenue.
Depreciation and Amortization
Evergy's depreciation and amortization increased $1.9 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily driven by capital additions at Evergy Kansas Central.
Evergy's depreciation and amortization increased $13.0 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by capital additions at Evergy Kansas Central and Evergy Metro.
Other Expense, Net
Evergy's other expense, net decreased $3.8 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily driven by a $4.8 million decrease due to higher Evergy Kansas Central and Evergy Metro equity AFUDC in 2020 primarily due to lower short-term borrowings; partially offset by a $1.5 million increase due to recording lower Evergy Kansas Central COLI benefits in the third quarter of 2020.
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Evergy's other expense, net increased $4.2 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
a $7.0 million increase due to recording lower Evergy Kansas Central COLI benefits in 2020;
a $3.6 million increase due to lower investment earnings primarily due to a loss from equity investments in 2020; and
a $2.8 million increase due to higher Evergy Metro pension non-service costs in 2020; partially offset by
a $9.0 million decrease due to higher Evergy Kansas Central and Evergy Metro equity AFUDC in 2020.
Interest Expense
Evergy's interest expense increased $4.0 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily driven by:
a $10.4 million increase due to the issuance of Evergy's $1.6 billion of senior notes in September 2019;
a $4.3 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020; and
a $3.1 million increase due to the issuance of Evergy Metro's $400.0 million of 2.25% Mortgage Bonds in May 2020; partially offset by
a $13.0 million decrease primarily due to Evergy's borrowings under its $1.0 billion term loan credit agreement in 2019 and lower commercial paper balances and weighted-average interest rates on short-term borrowings at Evergy Kansas Central and Evergy Metro in 2020.
Evergy's interest expense increased $13.2 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
a $35.3 million increase due to the issuance of Evergy's $1.6 billion of senior notes in September 2019;
an $8.2 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020;
a $6.1 million increase due to the issuance of Evergy Kansas Central's $300.0 million of 3.25% FMBs in August 2019; and
a $3.1 million increase due to the issuance of Evergy Metro's $400.0 million of 2.25% Mortgage Bonds in May 2020; partially offset by
a $26.5 million decrease primarily due to Evergy's borrowings under its $1.0 billion term loan credit agreement in 2019 and lower commercial paper balances and weighted-average interest rates on short-term borrowings at Evergy Kansas Central and Evergy Metro in 2020;
a $9.2 million decrease due to the repayment of Evergy Kansas South's $300.0 million of 6.70% FMBs at maturity in June 2019; and
a $4.6 million net decrease due to the repayment of Evergy Metro's $400.0 million of 7.15% Mortgage Bonds at maturity in April 2019, which decreased interest expense by $8.5 million, partially offset by a $3.9 million increase due to Evergy Metro's issuance of $400.0 million of 4.125% Mortgage Bonds in March 2019.
Income Tax Expense
Evergy's income tax expense decreased $15.5 million for the three months ended September 30, 2020, compared to the same period in 2019, primarily driven by a $5.0 million decrease due to lower Evergy Kansas Central, Evergy Metro and Evergy Missouri West pre-tax income in 2020, a $3.7 million decrease due to lower deferred income tax expense on temporary differences due to the decrease in the Kansas corporate income tax rate in 2021, a $3.3 million decrease due to flow-through items primarily driven by higher amortization of excess deferred income taxes and a $2.6 million decrease due to higher wind and other income tax credits in 2020.
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Evergy's income tax expense decreased $5.4 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by a $12.7 million decrease due to lower Evergy Kansas Central, Evergy Metro and Evergy Missouri West pre-tax income in 2020, a $5.4 million decrease due to lower deferred income tax expense on temporary differences due to the decrease in the Kansas corporate income tax rate in 2021, a $3.8 million decrease due to flow-through items primarily driven by higher amortization of excess deferred income taxes and a $3.3 million decrease due to higher wind and other income tax credits in 2020; partially offset by a $13.8 million net increase due to the revaluation of deferred income tax assets and liabilities in the second quarter of 2020 due to the change in the Kansas corporate income tax rate and a $7.9 million valuation allowance reversal in 2019 primarily related to alternative minimum tax (AMT) credits and the expiration of certain state net operating loss (NOL) carryforwards.
See Note 13 to the consolidated financial statements for more information regarding the change in the Kansas corporate income tax rate.
LIQUIDITY AND CAPITAL RESOURCES 
Evergy relies primarily upon cash from operations, short-term borrowings, debt and equity issuances and its existing cash and cash equivalents to fund its capital requirements. Evergy's capital requirements primarily consist of capital expenditures, payment of contractual obligations and other commitments and the payment of dividends to shareholders. See the Evergy Companies' combined 2019 Form 10-K for more information on Evergy's sources and uses of cash.
As of September 30, 2020, Evergy had $361.6 million of cash and cash equivalents on hand and $2.3 billion of available borrowing capacity under its master credit facility. Evergy believes that its existing cash on hand and available borrowing capacity under its master credit facility provide sufficient liquidity for its existing capital requirements.
Short-Term Borrowings
As of September 30, 2020, Evergy had $2.3 billion of available borrowing capacity under its master credit facility. The available borrowing capacity under the master credit facility consisted of $249.3 million for Evergy, Inc., $981.4 million for Evergy Kansas Central, $600.0 million for Evergy Metro and $448.0 million for Evergy Missouri West. Evergy Kansas Central's, Evergy Metro's and Evergy Missouri West's borrowing capacity under the master credit facility also supports their issuance of commercial paper. See Note 8 to the consolidated financial statements for more information regarding the master credit facility. Along with cash flows from operations and receivable sales facilities, Evergy generally uses borrowings under its master credit facility and the issuance of commercial paper to meet its day-to-day cash flow requirements.
Significant Debt Issuances
See Note 9 to the consolidated financial statements for information regarding significant debt issuances.
Regulatory Authorizations
The following table summarizes the regulatory short-term debt financing authorizations for Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West and the remaining amount available under these authorizations as of September 30, 2020.
Type of AuthorizationCommissionExpiration DateAuthorization AmountAvailable Under Authorization
Evergy Kansas Central & Evergy Kansas South(in millions)
Short-Term DebtFERCDecember 2020$1,250.0$1,250.0
Evergy Metro
Short-Term DebtFERCDecember 2020$1,250.0$1,250.0
Evergy Missouri West
Short-Term DebtFERCDecember 2020$750.0$672.0
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In October 2020, Evergy Kansas Central, Evergy Kansas South, Evergy Metro and Evergy Missouri West filed requests with FERC to have outstanding at any one time up to $1,250.0 million (combined for both Evergy Kansas Central and Evergy Kansas South), $1,250.0 million and $750.0 million in short-term debt instruments, respectively, through December 2022. FERC is expected to issue an order regarding this request by November 30, 2020.
Capital Expenditures
Evergy requires significant capital investments and expects to need cash primarily for utility construction programs designed to improve and expand facilities related to providing electric service, which include, but are not limited to, expenditures to develop new transmission lines and improvements to power plants, transmission and distribution lines and equipment. Evergy's capital expenditures were $1,210.1 million, $1,069.7 million and $764.6 million in 2019, 2018 and 2017, respectively.
In August 2020, Evergy announced its new Sustainability Transformation Plan, which includes, among other things, approximately $8.9 billion of expected base capital investments through 2024, or $1.4 billion more than Evergy's prior plan. See "Executive Summary; Strategy", above for further information regarding the Sustainability Transformation Plan. Capital expenditures projected for the next five years pursuant to the new plan, excluding AFUDC and including costs of removal, are detailed in the following table. This capital expenditure plan is subject to continual review and change.
20202021202220232024
(millions)
Generating facilities$453 $280 $767 $494 $262 
Transmission and distribution facilities893 1,314 1,336 1,252 1,131 
General facilities and other240 132 137 106 108 
Total capital expenditures$1,586 $1,726 $2,240 $1,852 $1,501 
Pensions
Year to date September 30, 2020, Evergy made pension contributions of $54.3 million. Evergy expects to make additional pension contributions of $78.4 million in 2020 to satisfy ERISA funding requirements and KCC and MPSC rate orders, which is expected to be paid by Evergy Metro. Also in 2020, Evergy expects to make additional contributions of $3.1 million to the post-retirement benefit plans.
Debt Covenants
As of September 30, 2020, Evergy was in compliance with all debt covenants under the master credit facility and certain debt instruments that contain restrictions that require the maintenance of certain capitalization and leverage ratios. See Note 8 to the consolidated financial statements for more information.
Off-Balance Sheet Arrangement
Evergy's off-balance sheet arrangements were reported in the Evergy Companies' combined 2019 Form 10-K. As of September 30, 2020, there have been no material changes with regards to these off-balance sheet arrangements.
Cash Flows
The following table presents Evergy's cash flows from operating, investing and financing activities.
Year to Date September 3020202019
(millions)
Cash Flows from Operating Activities$1,421.7 $1,447.3 
Cash Flows used in Investing Activities(1,029.9)(772.1)
Cash Flows used in Financing Activities(53.4)(785.4)
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Cash Flows from Operating Activities
Evergy's cash flows from operating activities decreased $25.6 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
a $102.0 million decrease in cash receipts for retail electric sales in 2020 primarily driven by lower sales as a result of unfavorable weather and a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19;
a $27.0 million increase in interest payments in 2020 primarily due to payments made in March and September of 2020 on Evergy's $1.6 billion of senior notes issued in September 2019; and
$19.9 million in cash payments to advisors associated with strategic planning; partially offset by
a $64.3 million one-time refund made to certain Evergy Metro and Evergy Missouri West customers in 2019 reflecting customer benefits associated with the Tax Cuts and Jobs Act; and
a $60.7 million increase in cash receipts for net tax refunds in 2020 primarily driven by a $57.2 million increase in refunds related to federal AMT credits.
Cash Flows used in Investing Activities
Evergy's cash flows used in investing activities increased $257.8 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
a $209.0 million increase in additions to property, plant and equipment due to increases at Evergy Kansas Central, Evergy Metro and Evergy Missouri West of $75.8 million, $71.9 million and $61.3 million, respectively, primarily due to increased spending for a variety of capital projects including transmission infrastructure additions, customer meters and a customer billing system; and
a decrease of $38.5 million in proceeds from COLI investments, primarily from Evergy Kansas Central due to a higher number of policy settlements in 2019.
Cash Flows used in Financing Activities
Evergy's cash flows used in financing activities decreased $732.0 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
$1,628.7 million of common stock repurchased as a result of Evergy's share repurchase program in 2019;
a $450.0 million decrease in retirements of long-term debt, net due to Evergy Metro's repayment of $400.0 million of 7.15%% Mortgage Bonds in April 2019 and Evergy Kansas South's repayment of its $300.0 million of 6.70% FMBs in June 2019; partially offset by Evergy Kansas Central's repayment of its $250.0 million of 5.10% FMBs in May 2020;
a $69.8 million payment for the settlement of an interest rate swap accounted for as a cash flow hedge of Evergy's $800.0 million of 2.90% Senior Notes issued in September 2019; and
a $24.9 million decrease in the repayment of borrowings against cash surrender value of corporate-owned life insurance primarily due to a higher number of policy settlements in 2019; partially offset by
a $1,484.7 million decrease in proceeds from long-term debt, net primarily due to Evergy's issuance of $800.0 million of 2.45% Senior Notes and $800.0 million of 2.90% Senior Notes in September 2019.
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EVERGY KANSAS CENTRAL, INC.
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
The below results of operations and related discussion for Evergy Kansas Central is presented in a reduced disclosure format in accordance with General Instruction (H)(2)(a) to Form 10-Q.
The following table summarizes Evergy Kansas Central's comparative results of operations.
Year to Date September 302020Change2019
 (millions)
Operating revenues$1,864.5 $(66.8)$1,931.3 
Fuel and purchased power329.9 (45.4)375.3 
SPP network transmission costs197.8 9.1 188.7 
Operating and maintenance376.3 (20.1)396.4 
Depreciation and amortization339.0 7.7 331.3 
Taxes other than income tax145.1 (0.2)145.3 
Income from operations476.4 (17.9)494.3 
Other expense, net(12.2)1.7 (13.9)
Interest expense127.7 (6.4)134.1 
Income tax expense149.2 103.0 46.2 
Equity in earnings of equity method investees, net of income taxes3.4 (0.2)3.6 
Net income190.7 (113.0)303.7 
Less: Net income attributable to noncontrolling interests8.7 (4.2)12.9 
Net income attributable to Evergy Kansas Central, Inc.$182.0 $(108.8)$290.8 
Evergy Kansas Central Utility Gross Margin and MWh Sales
The following table summarizes Evergy Kansas Central's utility gross margin and MWhs sold and provides a reconciliation of utility gross margin to income from operations.
 Revenues and ExpensesMWhs Sold
Year to Date September 302020Change20192020Change2019
Retail revenues(millions)(thousands)
Residential$627.5 $(12.9)$640.4 5,110 5,103 
Commercial511.0 (45.4)556.4 5,266 (407)5,673 
Industrial284.6 (23.9)308.5 3,911 (375)4,286 
Other retail revenues13.3 (2.5)15.8 31 (4)35 
Total electric retail1,436.4 (84.7)1,521.1 14,318 (779)15,097 
Wholesale revenues168.1 (14.4)182.5 5,775 184 5,591 
Transmission revenues215.2 9.7 205.5 N/AN/AN/A
Other revenues44.8 22.6 22.2 N/AN/AN/A
Operating revenues1,864.5 (66.8)1,931.3 20,093 (595)20,688 
Fuel and purchased power(329.9)45.4 (375.3)
SPP network transmission costs(197.8)(9.1)(188.7)
Utility gross margin (a)
1,336.8 (30.5)1,367.3 
Operating and maintenance(376.3)20.1 (396.4)
Depreciation and amortization(339.0)(7.7)(331.3)
Taxes other than income tax(145.1)0.2 (145.3)
Income from operations$476.4 $(17.9)$494.3 
(a)Utility gross margin is a non-GAAP financial measure.  See explanation of utility gross margin under Evergy's Results of Operations.
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Evergy Kansas Central's utility gross margin decreased $30.5 million year to date September 30, 2020, compared to the same period in 2019, driven by:
a $24.8 million decrease primarily due to lower retail sales driven by unfavorable weather (cooling degree days decreased 6% and heating degree days decreased 10%) and a decrease in weather-normalized commercial and industrial demand primarily due to temporary business closures resulting from government restrictions to slow the spread of COVID-19, partially offset by an increase in weather-normalized residential demand; and
a $5.7 million decrease related to Evergy Kansas Central's TDC rider in 2020.
Evergy Kansas Central Operating and Maintenance
Evergy Kansas Central's operating and maintenance expense decreased $20.1 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
a $23.4 million decrease in plant operating and maintenance expense at fossil-fuel generating units primarily due to an $11.2 million decrease from maintenance outages at JEC Unit 2 and La Cygne Unit 2 in the first half of 2019, an $8.4 million write-off of a regulatory asset for costs incurred during the JEC lease extension in the third quarter of 2019 and lower employee headcount in 2020;
an $11.9 million decrease in various administrative and general operating and maintenance expenses primarily driven by an $11.6 million decrease in labor and employee benefits expense that included lower employee headcount in 2020 and a $1.9 million decrease in property insurance expense due to a higher annual refund of nuclear insurance premiums received by Evergy Kansas Central related to its indirect ownership interest in Wolf Creek; and
a $9.1 million decrease in transmission and distribution operating and maintenance expense primarily due to lower labor expense in 2020; partially offset by
an $18.9 million increase in voluntary severance expenses due to a $15.5 million increase related to Evergy voluntary exit programs in 2020 and $3.4 million of voluntary severance expenses incurred in 2020 related to Wolf Creek voluntary exit programs.
Evergy Kansas Central Depreciation and Amortization
Evergy Kansas Central's depreciation and amortization expense increased $7.7 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by capital additions.
Evergy Kansas Central Interest Expense
Evergy Kansas Central's interest expense decreased $6.4 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by:
a $10.1 million decrease due to lower commercial paper balances and weighted-average interest rates on short-term borrowings in 2020; and
a $9.2 million decrease due to the repayment of Evergy Kansas South's $300.0 million of 6.70% FMBs at maturity in June 2019; partially offset by
an $8.2 million increase due to the issuance of Evergy Kansas Central's $500.0 million of 3.45% FMBs in April 2020; and
a $6.1 million increase due to the issuance of Evergy Kansas Central's $300.0 million of 3.25% FMBs in August 2019.
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Evergy Kansas Central Income Tax Expense
Evergy Kansas Central's income tax expense increased $103.0 million year to date September 30, 2020, compared to the same period in 2019, primarily driven by a $109.0 million net increase due to the revaluation of deferred income tax assets and liabilities in the second quarter of 2020 due to the change in the Kansas corporate income tax rate, partially offset by a $3.9 million decrease due to lower deferred income tax expense on temporary differences due to the decrease in the Kansas corporate income tax rate in 2021 and a $2.7 million decrease due to lower pre-tax income in 2020.
See Note 13 to the consolidated financial statements for more information regarding the change in the Kansas corporate income tax rate.
EVERGY METRO, INC.
MANAGEMENT'S NARRATIVE ANALYSIS OF RESULTS OF OPERATIONS
The below results of operations and related discussion for Evergy Metro is presented in a reduced disclosure format in accordance with General Instruction (H)(2)(a) to Form 10-Q.
The following table summarizes Evergy Metro's comparative results of operations.
Year to Date September 302020Change2019
 (millions)
Operating revenues$1,328.3 $(102.9)$1,431.2 
Fuel and purchased power306.0 (74.4)380.4 
Operating and maintenance305.7 (35.5)341.2 
Depreciation and amortization243.6 4.6 239.0 
Taxes other than income tax92.4 (3.9)96.3 
Income from operations380.6 6.3 374.3 
Other expense, net(13.8)(2.3)(11.5)
Interest expense85.5 (6.1)91.6 
Income tax expense5.1 (38.8)43.9 
Net income$276.2 $48.9 $227.3 
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Evergy Metro Utility Gross Margin and MWh Sales
The following table summarizes Evergy Metro's utility gross margin and MWhs sold and provides a reconciliation of utility gross margin to income from operations.
 Revenues and ExpensesMWhs Sold
Year to Date September 302020Change20192020Change2019
Retail revenues(millions)(thousands)
Residential$572.2 $(3.3)$575.5 4,249 (12)4,261 
Commercial558.1 (55.4)613.5 5,360 (468)5,828 
Industrial99.6 (7.1)106.7 1,279 (24)1,303 
Other retail revenues8.9 (3.4)12.3 54 (3)57 
Total electric retail1,238.8 (69.2)1,308.0 10,942 (507)11,449 
Wholesale revenues16.7 (38.0)54.7 3,690 (995)4,685 
Transmission revenues10.4 (3.6)14.0 N/AN/AN/A
Other revenues62.4 7.9 54.5 N/AN/AN/A
Operating revenues1,328.3 (102.9)1,431.2 14,632 (1,502)16,134 
Fuel and purchased power(306.0)74.4 (380.4)