Press Release

August 22, 2005

CURB files testimony in Empire's rate case; rejects ECA proposal

Today, the Citizens' Utility Ratepayer Board (CURB) filed direct testimony with the Kansas Corporation Commission in response to the Empire District Electric Company's request for a $4.18 million rate increase for its Kansas customers. (See KCC Docket No. 05-EPDE-980-RTS). If the application is granted, Empire's retail electric rates would rise about 25%.

Andrea Crane, the consultant who analyzed Empire's application on behalf of CURB, recommended that the KCC grant only a $2.89 million increase. She caught some errors in the company's application, made several adjustments to the company's capital structure recommendations, and recommended a more reasonable return on rate base for the Joplin-based utility. While Empire provided support for its claim that its operating costs have increased somewhat since its last rate increase, Crane testified that the company failed to support its request for the full 25% increase in retail rates.

Crane's testimony also soundly rejected the company's request to implement an energy charge adjustment (ECA). An ECA would remove the cost of fuel from base rates, and permit the company to directly pass through the cost of fuel to its customers via a separate surcharge, which would rise and fall with the volatile costs of fuel. As Crane noted in her testimony, when fuel costs are embedded in base rates, the company has an incentive to be efficient in managing its fuel costs between rate cases. On the other hand, if the company knows it will receive 100% reimbursement for its fuel costs from customers, regardless of how high they rise, there is no incentive whatsoever for the utility to manage its fuel costs efficiently.

Consumer Counsel David Springe of CURB expressed concern about Empire's proposal and its potential impact on customers. "With gasoline prices already high, and this winter's heating bills likely to set record highs, any amount of rate increase, especially with the addition of an ECA, will burden Empire's customers all the more." He said that CURB will do all it can to convince the KCC to reject Empire's request.

In the meantime, Springe urges customers to begin preparing for a winter of unusually high heating bills. "If you have been considering improving the energy efficiency of your home," he said, "don't wait any longer. Conservation will help lower both your electric bills and heating bills."

Empire's rebuttal testimony is due to be filed with the KCC on September 13, 2005, and the technical hearing is scheduled to begin on October 10. A public hearing will be held in Baxter Springs on September 27.