A settlement between Kansas Public Service and the agency that regulates the state's utilities may allow the local natural gas utility to implement a rate increase next month rather than at the end of the year.
Mike Ardis, a spokesman for the Kansas Corporation Commission, said the three-member commission voted this morning to approve a stipulation signed Tuesday by the Lawrence utility and members of the KCC staff.
The settlement agreement calls for KPS to receive an additional $625,000 in revenue through higher rates assessed to all of its customers large industrial consumers as well as residential and small- business customers.
Mike Hertling, KPS' vice president for administration, said utility officials still wanted to negotiate some details of the rate structure for the $625,000 increase.
"There has been a substantial settlement agreement," he said. "There are still a few loose ends that we hope to tie up."
THE SETTLEMENT is a compromise between the amount KPS requested and what the KCC staff suggested the company receive.
In December, KPS applied for a $1.284 million increase. However, the KCC staff opposed the request, recommending instead that the utility receive an increase of about $431,000.
Hertling said he had not calculated by how much the $625,000 increase would raise the average residential customer's monthly bill but estimated it would be in the range of $2 to $2.50.
The $1.284 million originally requested by KPS would have increased the average monthly residential bill by $4.61.
Had the rate case process not been derailed by the settlement, the KCC was expected to make a decision on the request late this summer. And any increase would have gone into effect late this year.
THE SETTLEMENT resolves a key dispute in the rate case. KPS initially had wanted the rate increase assessed only to residential and small-commercial customers and not to large-industrial consumers, such as manufacturing plants.
The utility argued that raising rates for the large-industrial customers would drive those users away from the system, decrease the volume of gas channeled through KPS and ultimately raise rates for all customers.
However, the agreement says large-industrial consumers will shoulder their share of the increase. The settlement adopts a suggestion by the KCC staff that the utility be able to "flex down" rates for high-volume consumers that threaten to leave the KPS system to buy gas from an independent supplier.
Ardis of the KCC said a formal order is being prepared by the KCC staff and, if it's completed quickly, the commission could sign it in time for the increase to go into effect Monday.
THE SETTLEMENT grew out of negotiations held May 14 through May 19. The KCC was scheduled to begin a technical hearing on the rate increase Tuesday morning but canceled the proceeding when the settlement was signed.
The settlement also was agreed to by the Citizens Utility Ratepayers' Board, a watchdog agency, and Mountain Iron & Supply Co., a Wichita-based natural gas broker, both of which had opposed KPS' request for an increase because of the exclusion of large industrial customers.
KPS sought the increase to help offset costs of a $12 million, 11-year program through which the utility is replacing bare steel and cast-iron pipes that are vulnerable to corrosion. All Kansas natural gas utilities have been mandated to make such improvements to their delivery systems.
However, the settlement also bars KPS from receiving another rate increase before Dec. 31, 1994.
Hertling conceded that the $625,000 will cover only a small portion of the utility's expenses for the improvements.
"We are out the cash in the meantime but hopefully it will be recovered in our next rate case," he said.