Topeka Worried about the effects on customers of Western's KPL and KGE utilities, state regulators Tuesday ordered Western Resources Inc. to halt its plans to separate the utilities from other business ventures.
The Kansas Corporation Commission order came as its hearings continue on Western's request to increase the rates it charges customers for electricity by $151 million.
The order, the KCC said, was part of an investigation "to determine whether Western Resources' corporate restructuring plans would cause irreparable harm and impair its ability to fulfill its obligation as a public utility."
Kansas law gives the KCC authority to ensure that utilities "provide effective and reliable service to Kansas customers at a just and reasonable rate."
Western on Friday applied for federal Securities and Exchange Commission approval to offer shares of its subsidiary Westar Industries to its current shareholders in a rights offering. The company did not seek KCC approval.
The KCC order said the application Western filed with the SEC "is of no legal effect" because it has not been approved by the KCC "as required by Kansas law."
Western spokeswoman Kim Gronniger declined to speculate whether the company would follow the order.
"It will take some time to review the order and evaluate our options," Gronniger said.
If Western disregards the order, the commission may take "any appropriate action necessary," the order says. KCC spokeswoman Rosemary Foreman declined to guess what the specific action could be.
Rep. Tom Sloan, R-Lawrence, said he was pleased with the KCC order.
"There may be nothing wrong with the restructuring, but it's better to look at it beforehand than react after everything is done and realize you are not able to make any changes," Sloan said.
On April 30, Sloan, who is vice chairman of the House Utilities Committee, along with its chairman, Rep. Carl Holmes, R-Liberal, and ranking Democratic, Rep. Laura McClure of Osborne, wrote a letter urging the KCC to halt the restructuring.
They also wanted the KCC to determine whether the transaction would heap debt onto customers of Western's KPL and KGE utilities.
After the rights offering, the company has said it plans to sell its utilities KPL and KGE to the Public Service Co. of New Mexico and eventually seek federal approval of an initial public offering of Westar Industries stock.
Testimony from hearings on Western's rates indicates that the company's restructuring plans could threaten service by leaving the utilities with most of the company's debt, the order said.
Walker Hendrix, an attorney for the watchdog Citizens' Utility Ratepayer Board, said the commission's order is forging new regulatory territory.
"We are creating a brand new path in utility regulation," Hendrix said. "The company didn't acknowledge the seriousness of the investigation."