Topeka ? Westar Energy Inc. remains “fragile,” and an agreement designed to reduce its debt and improve its finances has a thin margin of error, Chief Executive Officer James Haines says.

Haines hopes to convince the Kansas Corporation Commission to approve the agreement between the company and the KCC’s staff. Under the agreement, Westar would rely more heavily on investors and less on debt for its capital and it would rebate a total of at least $20.5 million in 2005 and 2006 to its 653,000 electric customers.

Westar already has cut its stock dividend and started selling nonutility assets, to provide cash for reducing its debt. However, approval of the agreement would eliminate a looming debt-reduction deadline set by the KCC last year.

A group of Westar’s largest industrial customers has signed onto the agreement, but the Citizens’ Utility Ratepayers Board, which represents small businesses and residential consumers, did not.

The KCC planned a hearing today on the agreement, and Haines filed written testimony beforehand. He said the KCC should not force Westar to make larger rebates to customers or lower rates.

“Westar Energy was and remains in fragile financial health,” Haines said in his testimony. “If we were required to do more, my confidence in the viability of the plan would diminish substantially.”

In November, the KCC ordered Westar to reduce its debt, once calculated at $3.6 billion, to $1.67 billion by Aug. 1. Westar has since reduced its debt to about $2.9 billion.

The latest plan would give the company until the end of 2004 to increase the percentage of capital coming from shareholders to 40 percent. Right now, the company calculates that such equity is 30 percent of the company’s capital — with most of the remaining 70 percent coming from debt.

To increase its equity — the net value of its property — the company could either reduce its debt or attract more capital from investors.

“It allows us more flexibility,” company spokeswoman Karla Olsen said Tuesday.

CURB concluded that Westar should eliminate all stock dividends, some $50 million a year, and consider larger rate concessions. Consumer Counsel David Springe called the rebates promised by Westar “a very, very small bone to consumers.”

Haines said such requirements would be “counterproductive” when the agreement showed promise for improving Westar’s finances.

In regular trading Tuesday on the New York Stock Exchange, shares of Westar closed at $16.08, up 33 cents.