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Archive for Saturday, November 9, 2002

KCC orders Westar to restructure

November 9, 2002

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— In an unprecedented move, Kansas utility regulators Friday ordered the restructuring of financially troubled Westar Energy Inc., one day after it was rocked by the indictment of its president and chief executive, David Wittig.

The Kansas Corporation Commission action was unrelated to the federal charges against Wittig, which involved a personal banking transaction.

But the KCCâÂÂs strongly worded order directly targeted WittigâÂÂs leadership of the company, which is the stateâÂÂs largest utility. Commissioners determined Westar ratepayers were being put at substantial risk of having to pay increased rates because of bad business decisions by Westar management.

âÂÂThe commission hopes as a result of this order, the management will focus less on nonutility business and more on bringing innovation and excellence to the utility business,â the KCC said.

Under the order, KPL, which provides electric power throughout much of the state, including Lawrence, will be transferred to a utility-only subsidiary. The order gives Westar 90 days to present a restructuring plan.

After ThursdayâÂÂs indictment was handed up, Wittig was placed on administrative leave without pay. Wittig said he was innocent of charges that he and a former bank president defrauded the bank in connection with a $1.5 million loan.

The KCC did not mention WittigâÂÂs legal troubles.

Instead, the three-member commission ordered Westar to take several actions aimed at putting its finances in order, removing debt from the ratepayer-funded utility and separating the utility from nonregulated businesses such as WestarâÂÂs home-security business, Protection One.

Utility regulation experts said the order marked the first time in state history the KCC had thrust itself into the inner workings of a regulated utility.

In addition, the KCC said it âÂÂreserves the option to initiate a management investigation if warranted by subsequent events or information.âÂÂ

Westar is the stateâÂÂs largest provider of electricity, with more than 600,000 customers.

The order comes more than 18 months after Westar sought approval of a restructuring, which the KCC halted, ruling that it was unfair to ratepayers.

Jim Zakoura, an attorney representing industrial customers, praised the KCCâÂÂs decision.

âÂÂWe think the commissionâÂÂs order is precisely what is needed for protection of ratepayers,â he said. âÂÂThe utility is an outstanding operation, and freed from the negative business impacts of the nonregulated businesses, ought to prosper.âÂÂ

Zakoura said the KCC had reached its decision after lengthy examination.

Nationally, several statesâ utility regulation commissions have ordered corporate restructurings because the utility portions of such businesses have been dragged down by poor performance in other business areas.

Spokesmen for Westar were unavailable for comment.

Walker Hendrix, chief attorney for a state agency that represents utility consumers, supported the order but had wanted the KCC to start a management audit of Westar.

âÂÂIn light of the indictment and the fact that the SEC, FDIC and IRS are looking at the company, we believe there is a certain amount of corporate waste that has been occurring. It seems to me that at this point in time, the time is right nowâ to have a management audit, he said.

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