October 3, 2007
KCPL Rate Case Settlement
CURB, Kansas City Power & Light, the Staff of the Kansas Corporation Commission and other intervenors have entered into an agreement that settles all disputed issues in KCPL's recent request to increase consumer rates by $47 million dollars. The agreement was presented to the Commissioners in a September 19, 2007, hearing. The Commissioners must make a decision on the agreement by early December.
In KCPL's second rate case application under $2.5 billion resource expansion plan, KCPL sought to increase consumer rates $34.2 million for traditional cost elements, plus sought an additional $12.8 million for cash flow support. KCPL also sought to implement an Energy Cost Adjustment to flow fuel costs and off-system sales revenues to consumers on a monthly basis.
According to the proposed settlement, KCPL will be allowed to increase traditional rates by $17 million annually, rather than the $34 million requested. KCPL will also be allowed to increase rates by an additional $11 million as a pretax prepayment on plant. The pretax prepayment is designed to aid KCPL with cash flow during the construction phase of the resource plan and provide consumers with lower long-term costs when the resource plan is completed. Consumers will get a dollar-for-dollar offset to future plant costs when the Iatan 2 generating station comes on line as a part of this prepayment obligation.
KCPL will also be allowed to begin charging fuel costs through an Energy Cost Adjustment. While CURB has historically opposed ECA adjustments, KCPL is the last electric utility in the state without an ECA. As a compromise, KCPL will forecast and set the ECA prices each quarter, rather than monthly, and will provide those prices to consumers in advance. Unlike the customers of other utilities with ECAs, KCPL's customers will know the fuel cost prior to using the electricity, rather than finding out the fuel price after the electricity has been used—when the bill arrives.
KCPL will also be required to credit consumers with 100% of the revenue from sales of power to off-system (non-KCPL) customers through the ECA. This is a substantial revenue source that will help offset the increase in KCPL's rates. While KCPL's base rates will increase a total of $28 million, if current off-system sales revenues and fuel cost projections remain steady, the amounts credited to KCPL's customers through the ECA should result in a net increase in overall rates of only $17 million.
While individual bills will vary, the net residential rate increase is about 7%. The net increase for small commercial customers is under 1%. The KCC Staff projects that the increase will be about $6 per month for the average residential customer.
Frequent rate increase requests were anticipated under the company's resource expansion plan. KCPL received a $29 million increase in rates December 6, 2006 (KCC Docket No. 06-KCPE-828-RTS), and is expected to file its third rate increase request in as many years in March 2008.