Westar granted $3 million increase / LJWorld.com

Archive for Thursday, December 29, 2005

Bills for customers in Lawrence will increase about $3 per month

December 29, 2005

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."

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.

What Westar wanted:

¢ $84.1 million rate increase

¢ Ability to earn 11.5 percent profit

¢ Fuel and environ-mental cost pass-throughs to customers

What KCC staff and CURB recommended:

¢ $30.4 million rate decrease (KCC staff)

¢ $48 million rate decrease (CURB)

¢ Ability to earn 8.75 percent profit (CURB); 9.6 percent (KCC staff)

¢ No fuel nor environmental cost pass-throughs (CURB )

¢ Fuel and environmental cost pass-throughs to the customer (KCC staff)

What Westar received from the KCC:

¢ $3 million rate increase

¢ Ability to earn 10 percent profit

¢ Fuel and environmental cost pass-throughs

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.

Discussion

LJWorld.com doesn't necessarily condone the comments here, nor does it review every post.
Read our full policy. Also, read about banned accounts and harassing comments.

29 December 2005
at 6:24 a.m.

Suggest removal

Permalink

Akbar (Anonymous) says…

Figures. Why does it always seem that the rate paying public gets screwed in order to line the pockets of fat cat thieves and idle investors?
29 December 2005
at 8:15 a.m.

Suggest removal

Permalink

craigers (Anonymous) says…

So can somebody show me that this rate increase has to do with actual costs of the product or is this just an increase to make up for their criminal executives?
29 December 2005
at 9:13 a.m.

Suggest removal

Permalink

glockenspiel (Anonymous) says…

The cost of producing electricity goes up and people don't expect to have a slight increase in their electricity bill? What a bunch of whiners.
29 December 2005
at 9:27 a.m.

Suggest removal

Permalink

yourworstnightmare (Anonymous) says…

craigers: I'd guess it is the criminal executives. Talk about adding insult to injury.
29 December 2005
at 10:14 a.m.

Suggest removal

Permalink

Sigmund (Anonymous) says…

For all the Neo-Communist in the audience (Akbar, et al), it might help if you just consider this another tax increase ('investment in energy infrastructure' if you prefer), ordered by the State of Kansas via the KCC, intended to lower the costs on the southern part of the region at the expense of the northeast. You're now just paying your 'fair share' of the government controlled, state imposed, energy monopoly.

Without the cost pass throughs those 'idle investors' and 'fat cat theives' (like the pension funds) might just take their capital and flee to more productive assests. Once that happens the taxpayers should be prepared to assume ALL the risks (and 'rewards') of running a KCC controlled energy utility.

Or you could break up this monopoly and allow out-of-state electric companies to compete to provide residential electric service. It is not as difficult as you imagine (other states have done this too varing degrees) and you might be pleasantly suprised what impact a little competition from a well run electric utility (whose 'Bored' of Directors did not allow the CEO to mismanage the company) might do to your electric rates. If Walmart had an Electric Power Division and offered residential electric service here, I'd be all over it!
29 December 2005
at 10:16 a.m.

Suggest removal

Permalink

bankboy119 (Anonymous) says…

It's amazing, I don't see one bit of corruption. $3 is corruption? Somehow I just don't see it. Instead of whining about the increase, do something about it. No, one person isn't going to bankrupt the company but if you guys feel like you're being oppressed then do something. You create a new energy source and give it to everyone for free. Don't buy one Starbucks this month and you'll be able to pay the increase for this month and next. Better yet, pay about $10,000 to put in solar panels and you get a tax break of %30 for what you spend on the new system. Then you don't even have to worry about the increase from Westar.
29 December 2005
at 10:43 a.m.

Suggest removal

Permalink

tenstring (Anonymous) says…

Neo-Communists? Whiners? Wow, how much are these thieves paying you to perpetuate their propaganda? I think this makes an excellent case for public owned utilities where there's no CEO to loot the company and the stockholders are everyone. People who do the work get paid a fair wage, and we don't have to foot the bill for someone's Caribbean beach house or holiday in Cancun.

Solar panels? Now you're talkin' — it would be nice if we spent as much money on that as we do to enrich the war profiteers and the oil industry with their corrupt war in Iraq. 30% tax break on solar systems? Make it 100% and take credit for actually solving a problem instead of creating more of them.

29 December 2005
at 12:01 p.m.

Suggest removal

Permalink

spacystaci8 (Anonymous) says…

The point isn't 3 bucks. Pretty much everyone has 3 bucks. Its just the point that executives are lining their pockets. IT starts with 3 bucks, everything is going up. I think wages need to increase to the same level as the cost of living, of course you could always drive to KC and get 2 bucks more an hour for the same job in Lawrence.
29 December 2005
at 1:40 p.m.

Suggest removal

Permalink

Sigmund (Anonymous) says…

Penalize corporate corruption on the same level as street crime? What a disaster that would be! I would rather have Wittig serve much more than the 60 days he would gotten if he raped a 13 year old girl here in Lawrence!

Only the State can grant monopolies and gaurantee a 10% ROI (even for the most mismanaged of firms). S+P reports that most Electric Utilities receive between 10%-14% ROI from their PUC's (Public Utilities Commsission's). Westar asked for 11.5% (11% currently), the Consumer Board asked for 8.75%. 10%, a reduction from the current rate of 11%, doesn't seem too out of line, even with the pass through provision of the Energy Cost Adjustment.

All the same, and regardless of what a great job Springe and the KCC do overall, I would much rather have electric utilities compete for residential service like they do for industrial service. If you believe Boeing, Sprint, and Hallmark don't get a huge rate cut everytime they threaten to generate their own power (and sell their excess back to the grid) your smoking way too much of Goob's Dada Dope.