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Archive for Thursday, December 21, 2006

Westar wants guarantee that rates will cover plant costs

December 21, 2006

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— Before it begins construction on a new electric generating plant outside Emporia, Westar Energy Inc. wants state regulators to guarantee consumers ultimately will pay for the facility.

The utility has asked the Kansas Corporation Commission to declare that rates will increase to cover costs associated with building and running the new plant. Westar plans to use the plant's two natural gas-fired units when the demand for electricity peaks, such as during hot summer weather.

Westar, with 667,000 customers, is the state's largest electric company, and it is the first to use a 2003 law that permits a utility to seek such a declaration before it begins building a new plant. The company filed its request Tuesday, and the three-member Kansas Corporation Commission has until June 18 to act.

The utility could begin construction of its plant without a declaration from the commission, but an order from the regulatory body would make it easier to raise money from investors, Westar spokeswoman Gina Penzig said Wednesday. The utility says construction will cost up to $318 million.

"One thing it does for the utility is it gives it some strength when it goes to investors to ask for financing of the project," Penzig said.

The project would increase Westar's total generating capacity by almost 10 percent, with each new unit's capacity at 300 megawatts, for a total of 600 megawatts. Construction would begin in the spring and be finished by mid-2009.

"Our customers' demand for energy is growing," Penzig said. "We set a new peak this past summer. These two units are to meet those customers' needs during those times of high use."

But Charles Benjamin, an attorney and lobbyist for the Sierra Club's Kansas chapter, said Westar and other utilities could avoid the need for new generating plants if they pushed conservation programs more aggressively.

Benjamin said Kansas ranks last in the nation for the amount of money its utilities spend on programs that help consumers conserve energy. He said it would be much cheaper for them - and consumers - to avoid the need for new plants.

"Before any new generating plants are constructed by these utilities, they ought to undertake a serious effort at energy efficiency," Benjamin said.

And, Benjamin said, if utilities do need more generating capacity, they ought to be more aggressive about building wind farms.

But Niki Christopher, an attorney for the Citizens' Utility Ratepayers Board, said conservation advocates have a difficult time documenting the exact benefits of their programs, while utilities have hard data on their consumers' rising demands. That makes it difficult to argue that new generating capacity isn't necessary, she said.

CURB represents residential consumers and small businesses, and Christopher said its biggest concern is that regulators continue to provide oversight to make sure Westar spends money efficiently.

"I think this has to do with the cost of financing," Christopher said of Westar's request. "The bankers want some assurance that there aren't going to be any surprises down the road."

Penzig said investors want assurances that the utility will have the revenues necessary to repay the money it borrows - and provide an adequate profit for the lenders.

"The benefit of this statute for the companies is that it gives them an order to take to their lenders. This takes away the uncertainty," said Susan Cunningham, the Kansas Corporation Commission's general counsel.

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