Fair return
Is Westar Energy only interested in wind power if it involves windfall profits?
Westar Energy’s response to the Kansas Corporation Commission’s ruling on its wind power proposal raises questions about the utility’s commitment to expanding wind energy in the state.
Last week, the KCC approved Westar’s plan to produce nearly 300 megawatts of wind power in the state, but it denied the company’s request for a 1 percent bonus on the profits it could reap from customers as a reward for shifting to a renewable energy source. A fair rate of return apparently wasn’t enough to satisfy Westar officials, who announced the next day that although they would proceed with 300 megawatts of additional wind power, they would suspend plans for an additional 200 megawatts by 2010.
Westar President and CEO Bill Moore said future plans were curtailed because the KCC ruling injected “regulatory uncertainty” into the picture. “We don’t see the order encouraging the further development of wind energy in Kansas,” he said.
It seems, however, that the only uncertainty for Westar is the fact that it isn’t certain to reap a 1 percent bonus in profits for its shareholders on the wind power project. The KCC ruling allowed Westar to recover the actual cost to construct wind farms as part of their rates. The commission also said Westar would be allowed to recover the costs of purchasing wind power from other producers. The KCC order would provide the company a fair rate of return but not a profit windfall that would have come at the expense of higher customer rates.
The Citizens’ Utility Ratepayer Board, which represents consumers had wanted the KCC to bar Westar from raising rates to cover the cost of building wind farms, which CURB thought exposed the ratepayers to too much risk. The KCC was willing to allow Westar to raise its rates to cover the costs of the new venture plus a reasonable profit, but it was unwilling to force Westar ratepayers to fund an additional 1 percent bonus for the company.
It’s a good idea for the state to encourage development of alternative energy sources, but fair is fair. The KCC’s job is to ensure that public utilities get a fair return on their investment without taking unfair advantage of their customers. Their ruling on Westar’s wind energy proposal seemed to do just that. It’s unfortunate that wasn’t good enough for the state’s largest electric utility.

