Consumers Win Key Issues in Appeal of Westar Rate Case

July 12, 2006

The Kansas Court of Appeals has overturned three rulings of the Kansas Corporation Commission concerning the recent Westar Energy rate increase. Westar customers may see rate reductions of up to $48 million system-wide if the court's opinion is upheld. The court's opinion represented major victories for CURB, the Kansas Industrial Consumers and USD 259, all of whom had appealed several of the KCC's decisions in the rate case.

The court ruled that the KCC had erred in granting Westar $29 million in depreciation rates for future dismantling of their steam-generation plants. The court found that there was so little evidence that Westar will ever dismantle the plants, the KCC's decision to include the costs in rates was a product of "unchecked speculation." The court also held that including future inflation when calculating future dismantling costs is beyond all fairness to current ratepayers.

Additionally, the Court of Appeals reversed the Commission's decision to deny Westar South's customers a long-standing benefit derived from the LaCygne plant lease. The court remanded because the KCC made a major shift in policy, but did not fulfill its obligation to provide a reasonable explanation for the change.

Finally, the court agreed with consumers that the KCC had failed to comply with the requirements of recent legislation that allows a utility to pass through its costs of transmission in a separate transmission delivery charge, so long as it is on a "revenue neutral" basis. The court said that the KCC violated the requirement of revenue neutrality when it allowed Westar to calculate the delivery charge based on increased FERC rates that have not yet been approved.

Disappointingly for consumers, the court also upheld the KCC's authority to allow Westar to pass through capital expenditures on environmental upgrades in a separate line-item surcharge, and to allow the utility to reinstate its ECA, which passes through fuel costs directly to customers.

However, the pro-consumer rulings in the opinion could result in as much as a $48 million reduction in Westar rates, so CURB will not be seeking review of the opinion from the Kansas Supreme Court. If the KCC does not seek review, the case will be sent back to the KCC for reconsideration in accordance with the court's opinion.