The Citizens' Utility Ratepayers Board has asked the state appeals court to overturn a $4.8 million natural gas rate hike affecting 96,000 customers in Kansas.
The case marks only the third time CURB has filed an appeal challenging a Kansas Corporation Commission decision since CURB was chartered as a state agency in 1989 to advocate for small utility consumers, said Walker Hendrix, CURB's chief consumer counsel.
Caroline Ong, lawyer for the Kansas Corporation Commission
CURB is challenging the Aug. 23 decision by the KCC in favor of a rate hike sought by UtiliCorp Inc. of Kansas City, which owns Kansas Public Service in the Lawrence area and Peoples Natural Gas in other parts of the state.
The KCC decision, if allowed to stand, means 84,000 of Utili-Corp's 96,000 customers statewide will pay an average of $55 more a year, commission officials said.
CURB alleges the rate increase decision "is without proper findings, devoid of reasoned decisionmaking, arbitrary and capricious, inconsistent with the regulatory authority of the commission to investigate, unlawful and in violation of due process."
The commission has not yet prepared its response for the appeals court but will strongly dispute CURB's claims, said its lawyer, Caroline Ong.
"We believe the commission's order should be upheld. That's about all the response we can give you now," she said.
The appeals court will hear arguments Nov. 8.
The rate changes approved by the KCC range from a $9-a-year decrease for about 1,900 customers to an increase of $165 a year for a few farmers near Kansas City. The range is so broad because the commission consolidated rates for several gas companies that have been acquired by UtiliCorp in recent years.
Small businesses will pay, on average, $123 to $180 more a year.
The rate increase will be in addition to an expected hike of 20 percent to 40 percent in the cost of natural gas itself this winter for customers throughout the area.
The price of natural gas is set by the open market and is passed straight through to the consumer.
The rate increase that the KCC just approved for Utili-Corp concerns the amount the company can collect for gathering, processing and delivering gas to its customers.
The main dispute between CURB and the KCC is over discounts UtiliCorp gives to about 65 large industrial customers who buy almost half the natural gas the company sells in Kansas.
CURB charges that the KCC improperly allowed UtiliCorp to put the cost of improvements to the gas system entirely on the backs of the small "captive customers." While industrial consumers can choose their gas supplier, residential and small-business customers can't.
Before the rate increase, industrial customers paid delivery charges of about 13.5 cents per thousand cubic feet of gas, while residential customers paid $1.54 for the same amount, Hendrix said.
Now, industrial customers still pay 13.5 cents, while homeowners pay about $1.95, Hendrix said.
CURB argues that the gas company should have to absorb the cost of the discounts it gives major customers. The KCC staff recommended that the company and the small customers split the cost of the discounts 50-50.
The commission, however, decided that the gas company could pass the whole cost on to the small customers.
"In this case, they shifted that burden from UtiliCorp to the residential and small-business customers," Hendrix said.
In addition, he charged that the commission failed in its duty to investigate the discounts and determine whether they are prudent.
George Minter, a spokesman for UtiliCorp, said that even though the big users pay much less per thousand cubic feet of gas, they generate substantial revenue to help run the system, keeping costs down for the residential customers.
"Large commercial consumers in Kansas have a choice," he said. "They're going to seek out the competitive prices."