Archive for Wednesday, July 4, 2001

KCC undecided on Western rates, but won’t give requested amount

July 4, 2001


— They didn't agree on a bottom line, but state regulators made it clear Tuesday that they're not going to give Western Resources Inc. the $150.5 million increase in electric rates it wants.

The three-member Kansas Corporation Commission had an administrative meeting to review Western's proposal and one from the KCC's staff, which recommended a $91.7 million decrease in the company's rates. The meeting was the first chance commissioners had to discuss Western's rates among themselves.

Western provides electricity to more than half the households in Kansas and 636,000 customers overall through its KPL division in northeast and central Kansas and its KGE subsidiary in southeast and south-central Kansas.

The commission plans to issue a written order by July 25, but the meeting settled relatively little about Western's rates. Afterward, KCC members, their staff and Western officials wouldn't predict the outcome.

But the KCC did settle some technical issues by rejecting Western's positions. Likewise, commissioners rejected some of their staff's suggestions. Their discussions suggest that their final order will leave rates somewhere between the two proposals.

The commissioners did express concern about a plan outlined by Western to reorganize itself. Western wants to separate KPL and KGE from other, unregulated business interests, then merge KPL and KGE with the Public Service Company of New Mexico, or PNM, in a $4.4 billion deal.

Because of those concerns, KCC members said they will consider placing conditions on whatever amount for rates they do approve, so that they can reconsider later.

In addition, commissioners said they will base the revenues they will allow Western to collect on a single, companywide cost of providing electric service, rather than separate figures for KPL and KGE.

KGE customers pay higher rates, and the decision suggested the KCC may attempt to close the gap though commissioners and their staff were quick to dismiss such an interpretation.

Only Walker Hendrix, consumer counsel for the Citizens' Utility Ratepayers Board, was willing to speculate what the commission's discussions might mean for ratepayers. CURB represents residential and small business consumers.

"The commission was not definitive as to the numbers, but it looks like we're moving toward a KPL increase and a KGE decrease," Hendrix said.

Uncertainty prevailed because commissioners didn't make any general statements about what they think the company deserves. Instead, they discussed a series of technical issues dealing with the costs Western would be able to recover through rates.

"We don't start with a number and work backwards," said Commissioner Brian Moline.

Western contends it needs higher rates to cover the cost of new electric generating plants and inflation in day-to-day operating costs.

Critics suggest that Western wants to stick KPL and KGE with all of the company's debt and force ratepayers to shoulder the burden, forcing consumers to subsidize Western's other, unregulated business interests.

Western officials had little to say after the meeting.

"We wouldn't presume to project where the commission is going," said company spokeswoman Kim Gronninger.

However, the KCC did reach tentative agreement on some issues that will cost Western money.

For example, the KCC rejected the company's request to receive a 12.75 percent return on the ownership value held by stockholders. Because Western has a monopoly on retail service in much of the state, the KCC limits its profits.

Commissioners said they favored a suggestion from staff that Western be allowed to earn 10.5 percent.

If Western isn't likely to prevail on some issues, the KCC's staff faces some defeats as well.

One example is the cost of long-term debts held by Western, expressed as a percentage of interest paid on that debt. The more costs the KCC says can be covered by rates, the more money Western will be allowed to raise.

Moline and Commissioner Cynthia Claus said they were ready to accept the company's figure of almost 7.51 percent. Staff proposed a figure of 7.14 percent and CURB, 7.06 percent.

Other issues remained unsettled.

"They decided some of the little stuff," said KCC spokeswoman Rosemary Foreman. "They did very little with the big stuff, definitively."

Western has said its reorganization and proposal for higher rates are not linked. However, commissioners disagreed.

Commissioners' statements suggested that they agree with critics' assessment that the reorganization would stick KPL and KGE with all of Western's debt, even some associated with its non-utility business interests. Claus had the strongest comments about the reorganization plan.

"I think it's wrong," she said. "I think it causes harm to ratepayers."

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