Update: Commission rules historic house is not a home; misses opportunity for fairness | Opinion

Update: On Tuesday, the Kansas Corporation Commission ruled in favor of Evergy and Kansas Gas Service in the case outlined in the column below, deciding that Abilene’s Victorian Inn is a business for utility billing purposes.

The unanimous decision was narrowly based and it means the owners, who live there, will continue to pay more for gas and electricity than they would under residential rates.

Unfortunately, the commission failed to address the larger point of fairness raised in this case, that thousands of other residential properties across the state are being used substantially as businesses while enjoying lower residential energy bills.

These include speculators who buy homes in residential neighborhoods and operate them essentially as hotels through online websites such as Airbnb and Vrbo. Those business owners will continue to pay lower residential bills for electric and gas service, at everyone else’s expense.

The following column was posted online on Kansas.com early Tuesday morning, before the commission made its decision.

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In these days of work-from-home and online bed-and-breakfasts, how do you draw the line between what’s a home and what’s a business?

The Kansas Corporation Commission will consider that issue Tuesday, following up on a complaint filed by the owners of a bed-and-breakfast inn in Abilene.

The question at hand is whether the owners of Abilene’s Victorian Inn, who rent out spare rooms in their spacious home to tourists, should pay lower residential rates or higher commercial rates for their electricity and natural gas.

The owners, Adrian and Jay Potter, argue that the B&B they bought 17 years ago is primarily their home, and should be treated that way on their utility bills.

“Since COVID, many people have been working in or out of their homes and this should be no different,” Adrian Potter wrote in a complaint to the KCC. “It is discriminatory to charge us as a commercial property compared to owners of Air BNB’s that are charged residentially and most of which do not live on the property.”

The vacation rental website Airbnb lists “over 1,000 places” for short-term rental in Kansas, 18 in shouting distance of Abilene.

And according to Forbes Magazine, about 13% of full-time employees work from home all the time and 28% split work time between home and office, after corporations off-loaded office space and normalized work-from-home during the COVID-19 pandemic.

The Potters’ space is unique. It was originally built as a single-family home in 1887 by Edward E. Hazlett, a pioneering local physician who lived there with his family until his death in 1916.

In the 1920s, Arthur Hurd, a prominent lawyer with four children and a busy social life, bought the home and remodeled it to his wife’s tastes, doubling it in size.

In the 1940s, it was divided up into 11 bedrooms, eight of which were rented to tenants during World War II.

Owners ask for utility split same as property tax

In 1992, then-owners Don and Diana McBride restored the inn in the style of the ‘20s, added a three-bedroom attic suite and established the bed-and-breakfast.

The Potters continued to rent rooms, but the home’s primary use has always been their home, Adrian Potter said. Occupancy is “not even close” to 100%, she said. “Even if we rent out all our rooms one night, the next night we might not rent any.”

The one constant is the family’s presence in the home, where they raised their children, who have since grown up and moved out, she said.

“We have lived here as permanent residents and only leave for vacations and normal errands such as grocery shopping etc.,” her KCC complaint says. “We sleep in the home, eat in the home, and use its separate kitchen, living facilities, provisions for sanitation like any other residential family in Kansas … whether we have renters or don’t have renters, the space still needs to be heated and cooled to be comfortable.”

Dickinson County divides the inn 65% residential and 35% commercial usage for property tax purposes, and the Potters are asking for the utilities to split the bills the same way.

That seems a reasonable compromise, but the utilities aren’t having it.

Kansas Gas Service and Evergy argue that the property is a business, regardless whether the Potters live there or not.

“Under the “Home” tab on the Inn’s website, Potter describes the property “as a lodging/food service establishment,” wrote KGS attorneys James Flaherty and Robert Vincent. “The video (on the site) indicates the premise has been a bed and breakfast operation since 1992 and was purchased by Potter seventeen years ago to be operated as a bed and breakfast operation … The Video also shows that the Inn operates a gift shop on the premise.”

Adds Evergy lawyer Cathryn Dinges: “Ms. Potter is clearly operating her property as a hotel. The fact that she and her husband may also live there is irrelevant to that conclusion.”

When Adrian Potter filed the original complaint, handwritten on a KCC form, she wasn’t expecting it to escalate to a legal battle with two of the biggest companies in the state. “It was just me trying to change it from commercial to residential,” she said.

Both utilities are requesting summary dismissal of the complaint. Whether to grant that is the decision the commission will make Tuesday. An official order has been prepped, but the KCC doesn’t release those until after the meeting.

Many corporate work-at-home employees pay own utilities

Adrian Potter didn’t even know it was on the commission agenda for Tuesday until I told her on Monday and sent her a link. “Nobody has notified me about that,” she said.

Given that and the forces arrayed against her, she fully expects to lose the case.

I really hope this doesn’t fall to summary dismissal, because there are deeper questions involved:

▪ Is what the Potters are doing qualitatively different from an accountant meeting clients and doing taxes in his home office, or a beautician cutting peoples hair in her kitchen eight hours a day? Like the Potters, they advertise on the web.

▪ Is it different from a speculator who buys a residential home, has never lived there, never intends to, and rents it out on Airbnb or Vrbo on a daily or weekly basis — like the notorious College Hill “party house” in Wichita, where there was a fatal shooting two years ago? Those are advertised on the web too.

▪ Is it different from the corporation that jettisons its costly office space (and utility bills) and has hundreds of full-time employees working out of their living rooms, paying their own heating and air conditioning? Those companies certainly offer their products and services on the web.

One thing is certain. As time passes, more and more commerce will be done out of people’s homes (unless you work for Elon Musk — he hates that).

If the commission doesn’t do something, rates are only going to get less fair over time.

The Abilene’s Victorian Inn case gives the KCC an opportunity to establish a consistent set of rules, either clearly defining how much work can be done at a residential utility customer’s home before it becomes a commercial account, or possibly coming up with formulas to split the cost of work-at-home between residential and commercial billing.

The people who set our taxes seem to have figured this out. It would be wonderfully forward-thinking if the people who set our utility rates could do the same.