Topeka Westar Energy Inc. agreed Monday to provide more than $20.5 million in rebates to customers as part of a settlement reached with state regulators and large electric consumers.
The settlement, which still needs the approval of the Kansas Corporation Commission, also would free Westar from the KCC's deadline for reducing its debt level by Aug. 1 to $1.67 billion. Westar now would be required to have a capital structure of at least 40 percent equity by Dec. 31, 2004.
Mark Ruelle, executive vice president and chief financial officer, said Westar's current equity level was about 30 percent.
The settlement was reached during informal discussions last week between Westar, the KCC and representatives of the Citizens' Utility Ratepayer Board, MBIA Insurance and the Kansas Industrial Consumers.
Westar agreed to rebate customers $10.5 million on May 1, 2005, and another $10 million on Jan. 1, 2006. Westar also agreed not to file for a rate increase until May 1, 2005.
Further, Westar will agree to rebate an additional $2.7 million if the company is able to recover compensation paid from 1998 to 2002 to former president and chief executive David Wittig and chief strategic officer Doug Lake. Westar filed for arbitration in June to recover more than $100 million from Wittig and Lake, who both resigned from the company late in 2002.
Jim Ludwig, Westar vice president for public affairs, said the agreement addressed concerns raised by KIC and others that more value should be returned to customers as part of the corporate restructuring.
"We feel confident that this agreement will allow us to implement the plan by 2004," Ludwig said.
Westar, with more than 653,000 customers, has been under order by the KCC to reduce its debt, once as high as $3.6 billion, and restore its financial stability.
That plan, as presented by Westar, includes shedding all of the company's nonutility assets.
"In the opinion of KIC, this settlement is clearly in the public interest," said Jim Zakoura, attorney for KIC.
CURB consumer counsel David Springe said he did not sign the settlement. He maintains that Westar should be paying more toward retiring its debt, including not paying $50 million a year in dividends.