Topeka 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 KCCÃ¢ÂÂs strongly worded order directly targeted WittigÃ¢ÂÂs leadership of the company, which is the stateÃ¢ÂÂs 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.
Ã¢ÂÂThe 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,Ã¢ÂÂ 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 ThursdayÃ¢ÂÂs 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 WittigÃ¢ÂÂs 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 WestarÃ¢ÂÂs 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 Ã¢ÂÂreserves the option to initiate a management investigation if warranted by subsequent events or information.Ã¢ÂÂ
Westar is the stateÃ¢ÂÂs 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 KCCÃ¢ÂÂs decision.
Ã¢ÂÂWe think the commissionÃ¢ÂÂs order is precisely what is needed for protection of ratepayers,Ã¢ÂÂ he said. Ã¢ÂÂThe utility is an outstanding operation, and freed from the negative business impacts of the nonregulated businesses, ought to prosper.Ã¢ÂÂ
Zakoura said the KCC had reached its decision after lengthy examination.
Nationally, several statesÃ¢ÂÂ 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.
Ã¢ÂÂIn 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 nowÃ¢ÂÂ to have a management audit, he said.