Topeka An attorney for half a dozen of Westar Energy Inc.’s largest industrial customers told Kansas regulators Monday that they should never consolidate the utility’s electric rates.
The state’s largest electric company was formed in the 1990s through the merger of a Topeka utility and a Wichita-based business. It charges different rates in its northern and southern divisions, but the Kansas Corporation Commission has worked to close the gap.
Westar argues that its rates for most customers are close enough to make consolidation relatively painless. It has asked regulators to approve what amounts to the first phase.
The commission plans to finish hearings this week and has until Oct. 26 to rule. It could order a full consolidation of rates; accept Westar’s proposal to go to a single charge for some items, such as transmission costs, on all customers’ bills, or block consolidation.
A decade ago, questions about Westar’s rates roiled Kansas politics, pitting legislators and other officials in the south-central part of the state against those in the northeast. Part of the current debate centers on concerns that the federal government’s attempts to lower U.S. greenhouse gas emissions will force costly upgrades at Westar’s coal-fired power plants — and about who would pay for them.
Wichita officials worry southern customers will end up paying more than their share of the company’s operating costs. Some industrial customers fear they’ll see double-digit rate increases, no matter how close most customers’ charges are.
“My position is that the systems should be kept separate,” said James Zakoura, an attorney representing Kansas Industrial Consumers.
Commission Chairman Tom Wright asked: “Forever?”
“Forever,” Zakoura answered.
Zakoura’s group represents aircraft manufacturers Cessna Aircraft Co., Hawker Beechcraft and Sprint AeroSystems Inc., as well as Oxidental Chemical Corp.; Goodyear Tire & Rubber Co., and Coffeyville Resources, an oil refiner. He said they’re concerned any move toward consolidation will be a shift away from determining rates based on each division’s cost of providing service.
In the 1990s, Wichita officials pushed for “parity” in rates because charges for southern division customers were significantly higher.
Kansas Gas & Electric Co., the corporate predecessor of Westar’s southern division, owned 47 percent of the Wolf Creek nuclear plant, which began generating electricity in 1985. Kansas Power & Light, later Westar’s northern division, didn’t have a stake in nuclear power, opening its huge coal-fired Jeffrey Energy Center northwest of Topeka in 1978.
After the merger, rates for former KG&E customers continued to reflect the more expensive investment in nuclear power. In 2000, according to Westar, southern customers paid an average of 8.3 cents per kilowatt hour of electricity, 32 percent more than the 6.3 cents paid by northern customers.
Now Westar’s 366,000 northern division customers pay an average of 8 cents per kilowatt hour, and the 313,000 southern customers, 7.8 cents, a gap of only 0.3 percent.
Westar attorney Martin Bregman said the utility operates as a single company, except in its rates. “We are in reach of what was a long-sought goal,” he said. “We are coming to the end of a very long journey.”
But Wichita officials object because southern rates have finally dipped below northern ones. They argue that southern customers shouldered the cost of Wolf Creek and are now seeing its benefits. Meanwhile, they say, without consolidation, northern — not southern — customers would pay for environmental upgrades to Westar’s coal plants.