February 05, 2009
CURB Strips $25 Million from KCPL Rate Increase Request
The Citizens' Utility Ratepayer Board (CURB) filed Direct Testimony on Tuesday opposing KCPL's request to increase rates by $71.6 million.
CURB consultant Andrea Crane recommended that the Commission reduce KCPL's $71.6 million request to $46.78 million. Her $46.78 million recommendation assumed the Commission will include the cash flow mechanism it approved in KCC Docket No. 04-KCPE-1025-GIE (1025 Docket), which provides the company with additional cash flow to maintain specified bond coverage ratios while completing the construction contemplated in its regulatory plan. CURB refused to sign the settlement in the 1025 Docket because the cash flow mechanism permits credit rating agencies, rather than the KCC, to effectively set rates for KCPL.
While Ms. Crane acknowledged KCPL'S investment in environmental upgrades at the Iatan Unit 1 generating facility justified additional revenues, she noted concerns about the escalating capital expenditures associated with KCPL's regulatory plan, and asked the Commission to hold KCPL shareholders responsible for some of those escalating costs. She also objected to over $14 million in merger and integration costs related to the Aquila acquisition that the Company had previously agreed would not be charged to ratepayers. Other items scrutinized by Ms. Crane included: salary and wage increases, incentive compensation, severance costs, maintenance expenses, corporate advertising, lobbying expenses, company donations, sporting events expenses, and miscellaneous operating expenses, including over $200,000 in employee appreciation expenses incurred at Worlds of Fun.
CURB witness Brian Kalcic also filed testimony on February 3, urging the Commission to amend the Company's existing rate designs to provide a lower (affordable) rate for the first 1,000 kWh and a higher rate for usage over 1,000 kWh by residential customers. Mr. Kalcic also sponsored a more conservation-oriented rate design for small business ratepayers.
"Given the current economic crisis, the Commission should carefully consider the recommendations made by CURB to trim KCPL's rate increase to only those amounts required by the additional investments made by the Company," Consumer Counsel David Springe said. "The Company's rate increase request comes at the worst possible time for ratepayer."
The rate design proposed by CURB, Mr. Springe explained, is designed to help reduce costly demand on utility facilities. "It is time for all parties to stop talking about conservation and implement rate designs that will actually achieve conservation," Springe said. "Existing utility rate structures are legacies from a time when utilities had excess base load generation and were designed to encourage consumption. CURB's rate design, if adopted by the KCC, will encourage conservation and reduce the growth in our usage, while maintaining affordable rates for those most challenged by today's troubled economy."