Topeka ? State officials Wednesday approved a $3 million rate increase for Westar Energy, plus measures that will allow the company to pass its fuel, environmental and transportation costs to consumers.

The Kansas Corporation Commission called its order a fair balance of interests, but consumer advocates were stunned, saying the “pass-throughs” would hit ratepayers hard.

Lawrence customers will see an average $3-a-month increase in their electric bills, but that figure could climb higher with the additional charges.

The new rates could be part of February bills.

“The Kansas Corporation Commission has put consumers on the hook for higher prices,” said David Springe, head of the Citizens’ Utility Ratepayer Board. “This commission has little concern for consumers.”

• On the street: What is your reaction to Westar increasing local energy rates?
• City, county budget for higher costs
• Westar rate action due today (12-28-05)
• Consumer advocate speaks out against Westar rate increase (12-15-05)
• Westar seeks payment for expenses (12-15-05)

For their part, Westar officials said they had mixed feelings about the order. The state’s largest electric company had sought an $84.1 million rate increase.

“The commission’s order with respect to the level of our rates is disappointing,” said James Ludwig, Westar vice president of public affairs.

Lawrence hit harder

The effect of the KCC order will be felt doubly hard in Lawrence and the region.

The three-member commission cut rates to Westar’s southern region but increased rates in northeast Kansas by $24.2 million.

The average residential customer’s bill in Lawrence will increase approximately 5.1 percent per month, from $58.50 to $61.50, the KCC said.

In addition to Lawrence, the northeast region served by Westar’s Kansas Power and Light includes Atchison, Leavenworth, Olathe, Topeka, Emporia, Manhattan, Salina, Hutchinson and Parsons.

For customers in the southern region, however, the average monthly residential bill will decrease approximately $3.47 from $72 to $68.53. That area includes Wichita, Arkansas City, El Dorado, Fort Scott, Independence, Newton and Pittsburg.

State officials have sought to even rates between the two regions, which differ because the southern Westar region has borne the brunt of costs associated with the Wolf Creek nuclear plant.

New adjustment

Not only will northeast Kansans be hit with higher rates, but all Westar customers will find a new line on their bills called the Energy Cost Adjustment.

When Westar’s fuel costs increase, the company will simply pass that on to the ratepayer on a monthly basis. Before the order, Westar had to justify fuel costs in its rate requests.

Springe said testimony in the rate case indicated Westar’s fuel costs increased $50 million during the 12-month period ending in August.

“That is a huge shifting of risk from the company to customers,” Springe said. “They’ve added volatile costs to consumer bills without having to go through the KCC rate request process.”

The KCC argued that customers should pay for prudent fuel costs, and one of the reasons for allowing the Energy Cost Adjustment was to provide incentives for conservation. Also, when fuel costs decrease, then customers will benefit from a reduction, the KCC said.

But Springe said Westar also won a major concession from the KCC when it allowed the company to earn a 10 percent profit. CURB had recommended 8.75 percent while Westar sought 11.5 percent. Currently, Westar’s allowable profit is 11 percent based on its rate case from 2001.

Westar also will be allowed to pass on costs to retrofit power plants to comply with environmental regulations, consumer advocates said.

“All in all, we feel that the decision is very ratepayer-unfriendly,” said Jim Zakoura, an attorney who represented business interests during the rate case.

Westar sought more

Westar said it needed an $84 million rate increase to offset financial problems from former chief executive officer David Wittig’s tenure and to improve services.

Wittig, who resigned in 2002, was convicted this year on charges that he and another former Westar executive looted the company.

The KCC, however, said it excluded costs from the rate request “associated with the misdeeds of prior Westar management.”

The KCC also said its order allows Westar to keep its revenues on par with existing rates.

“These current revenues have enabled Westar to improve its balance sheet, attract investors, refinance debt, move toward investment grade credit ratings, and yet generate electricity at the cheapest rates in Kansas,” the KCC said.