Archive for Tuesday, December 4, 2007

Reasonable rates

Reasonable rate increases to support energy diversity may benefit Kansas consumers in the long run.

December 4, 2007


Pursuing a new venture can be a costly proposition for a business and, before pursuing such ventures, a business needs to weigh the risks against the potential benefits.

That's the situation Westar Energy is in as it considers whether to pursue development of a major wind power program in Kansas. To try to ensure that the wind power development will be financially profitable for their company, Westar is asking the Kansas Corporation Commission for permission to raise its rates to cover the costs of the project along with a 1 percent rate of return bonus.

The Citizens Utility Ratepayer Board says Westar is underestimating how much the wind power project will add to its customers' electrical bills and that the proposal will simply benefit Westar investors at the expense of Kansas electricity users.

Westar is protecting its business interests; CURB is protecting consumer interests. It's the job of KCC to work with both interests by determining what is a reasonable rate of return for the investment Westar is making.

KCC is responsible for verifying that Westar is making a reliable estimate of how much customers' bills will rise to cover the cost of the project and whether a 1 percent rate of return is reasonable. At the same time, however, Westar can't be expected to take its business in a major new direction without a reasonable plan to make a profit off that venture.

Diversifying energy sources in the state serves the Kansas public, especially in the long run. It's not unreasonable to ask electrical users to invest in such projects, whether that means new nuclear generating plants or increased use of wind power. As a Westar representative pointed out, an investment in wind projects now may protect Kansans from fluctuations in more volatile energy markets over the long-term - although this would have to be a major, even massive wind power effort to protect current and future energy users from severe declines in coal-fired energy or huge increases in natural gas prices.

CURB is doing the right thing by making sure KCC keeps consumers in mind, but, over the long haul, squeezing electrical rates may not be as great a benefit to Kansas consumers as having increased wind-generated electricity at their disposal. The state can't expect Westar to invest in such projects without getting a reasonable return on their investment. However, how many private businesses are guaranteed a certain profit? Not many.

KCC Chairman Thomas Wright affirmed last week that KCC intends to support alternative energy and energy efficiency projects in the state. That doesn't mean the state should approve a blank check to help Westar work toward those goals, but reasonable rate increases to increase the state's energy-producing diversity probably are a good investment for the state.


toefungus 10 years, 5 months ago

Why do businesses these days require public dollars before taking any risks? Like the Jackson County residences on first dibbs for Arrowhead tickets, any business collecting taxpayer support should have to provide jobs to a taxpayer first. Non-taxpayers get the left overs.

kneejerkreaction 10 years, 5 months ago

Businesses that think they can get public dollars will certainly ask for them. And Westar, like all noncompetitive public utilities, are more than used to asking for their money.

It is in Westar's nature to ask for money from ratepayers.

It's up to the KCC to deny them access to that money, because wind was tried 20 years ago and failed. Westar needs to explain why they think wind will work this time. And "the technology is better" argument won't fly, you still can't store large amounts of electricity.

That said, we need to explore feasible renewables.

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