February 05, 2009
KCC approves Westar increase; defers consolidation to new docket
On January 21, 2009, the Kansas Corporation Commission approved a unanimous settlement agreement that grants Westar Energy an annual rate increase of $130 million. (KCC Docket No. 08-WSEE-1041-RTS). The rate increase will become effective within the next 30 days, and will be divided evenly between customers in the company's two divisions, Westar North and Westar South.
The KCC estimates that the average residential customer will see electric bills rise about 11%, or roughly $6 to $9 a month. However, CURB notes that KCC estimates of the impact of rate increases is based only on the increase to base rates, not the energy charge adjustment (ECA), which passes through to customers Westar's costs of fuel and purchased power. Any increases in the company's fuel and purchased power costs will be passed through in addition to the increase in base rates. Other surcharges are also subject to increases as increased costs are incurred by Westar.
CURB was a signatory to the agreement, which contained several key provisions that limited negative impacts on customers. Westar agreed to accept an increase that was $47 million smaller than it requested, and agreed to forego requesting a higher rate of return on its current wind generation plants, which would have cost customers about $50 million over the next 20 years had the KCC granted the company's request.
CURB was instrumental in getting the parties and Westar to agree to adopt CURB's proposal for a residential rate design that will encourage conservation. All customers will be charged a lower rate for the first 900 kWh used each month. Kilowatt hours over 900kWh will be charged at a higher rate in summer to encourage conservation. The discount rate for winter power was reduced so that the lower rate for the first 900 kWh could be made available to all residential customers.
The Commission also decided to sever the issue of whether Westar should consolidate its rate structure rather than maintain separate rates for its North and South divisions. Westar had requested permission to consolidate rates, but several parties' concerns about how consolidation would impact the various classes of customers threatened to scuttle the settlement, so they asked the Commission to decide whether the issue should be severed from the rate case. CURB was also concerned that the public hadn't been adequately informed about how consolidation will impact their rates, because the Commission held the public hearings in the rate case before the parties had an opportunity to file testimony. Parties to the settlement met recently with the KCC Staff to discuss a proposed procedural schedule for a consolidation docket. Staff is expected to report to the Commission on the parties' proposals, and we expect that the Commission will be opening a new docket later this month.