February 8, 2011
KCPL awarded $21.8 million rate increase in final rate case under regulatory plan; company appeals
TOPEKA, Kansas, February 8, 2011 — On November 22, 2010, the KCC awarded Kansas City Power & Light Company (KCPL) a $21.8 million rate increase in its fourth and final rate case contemplated under the regulatory plan approved by the Commission in 2005. The $21.8 million rate increase was less than 40% of the $55.2 million increase requested in the company's original application.
In awarding the $21.8 million rate increase, the Commission completely disregarded the testimony offered by its own Staff that KCPL was significantly imprudent in man-aging expenditures for building the Iatan 2 coal plant. Staff recommended a $230 million reduction in the company's rate base.
In fact, the only imprudence adjustment imposed by the Commission for Iatan 2 was a $20.5 million adjustment—which KCPL's own expert witness admitted was justified by the company's imprudence. Including its prudence disallowance, the Commission Staff recommended a rate decrease of over $7.3 million. Thus, the Commission's decision to disregard the imprudence evidence offered by its own Staff sig-nificantly increased KCPL rates.
The Commission awarded KCPL's shareholders a 10% return on equity (ROE, or profit), substantially less than the 11.25% ROE originally requested by KCPL in its application, or the 10.75% ROE KCPL proposed in rebuttal testimony. However, the 10% ROE awarded by the Commission was still higher than the 9.39% ROE that CURB had recommended.
CURB was also particularly disappointed that the Commission granted KCPL's request to reduce the $77 million pre-payment on plant benefit that ratepayers will receive over the life of the Iatan plant by $28.4 million in accumulated deferred income taxes (ADIT). A written description provided by KCPL in the last rate case showing how the prepayment would be paid back to ratepayers did not even mention offsetting the prepayment by ADIT, yet the company sought to have the benefit reduced by this amount. Unfortunately, the Commission granted the company's request.
On February 7, KCPL filed an appeal of the rate case order with the Kansas Court of Appeals.
For further details on the Commission's order, see the January 2011 CURBside newsletter.
KCC Docket No. 10-KCPE-415-RTS