The price of just about everything is going up, but there are real questions about whether Westar Energy’s electric rates should go up by the $91 million the company is seeking in a request pending before the Kansas Corporation Commission.
The request would add an average of about 6 percent to Westar customers’ bills, but not all customers are equal. Residential bills will increase by about 7 percent, Westar officials said, and commercial bills will rise by 4-6 percent.
It’s the first general rate increase sought by Westar since 2008, but that doesn’t mean that electrical bills haven’t been going up in the last three years. General rates may not have increased since the KCC approved a $130 million increase for Westar in 2008, but all those “extra” charges on your bills certainly have.
According to figures supplied by the Citizens Utility Ratepayer Board, $123 million in “line item” charges have been added to Westar customers bills since 2008. Those charges are in three categories: transmission, environmental and energy efficiency. These fees are aimed at boosting transportation facilities, making required environmental improvements at Westar plants and funding energy efficiency programs. Since 2008, Westar has collected $79.2 million in additional fees for transmission lines, $78.1 million in environmental fees and $13.8 million for energy efficiency — in addition to the $130 million general increase.
Major environmental work under way at the Lawrence Energy Plant will be covered by those special fees, Westar officials told a group of Journal-World staff members last week, as will new energy efficiency programs being introduced in Lawrence. So if Westar is covering all of those programs with special fees, what will it use its general rate increase for?
A large chunk of it (about $37 million) will go to fund pensions for Westar employees. Lawrence customers also may be interested in the company’s plans to add $20 million to its existing $25 million tree-trimming program. Company officials say the program is a tried-and-true way to increase system reliability and decrease power outages, although recent experience in Lawrence seems to buck that trend.
Perhaps the part of the rate request that has gotten the most attention from consumers, however, is the provision for a 10.6 percent rate of return for Westar shareholders. Such a high figure seems unconscionable to many Westar customers during the current economy. Westar officials say the 10.6 rate is necessary for the company to compete for investors with other utilities nationwide. David Springe, consumer counsel for CURB, confirms that the rate isn’t out of line with what other utilities offer but pointed out at a public meeting in Topeka that CURB believes that amount “is clearly excessive in a market where 30-year bonds are selling below 3 percent.” Springe also notes that line-item riders have removed much of the risk to Westar investors, because the riders cover most of the variable costs of the company’s operation.
It’s easy to see why Westar customers would balk at paying the higher rates. Stock market losses that hurt the Westar pension fund also have hurt investors across the state. Kansans are earning miniscule interest rates on any kind of fixed-rate investment. Individuals and businesses are having to delay desirable, but optional expenses until the economy improves. It seems Westar should do the same.
If history is any guide, Westar is unlikely to get approval for its entire $91 million request. The KCC is right to drive a tough bargain on behalf of consumers. The company needs to earn enough to stay in business, but it seems like a good time for the KCC to make sure Westar isn’t padding its spending or its profits at the ratepayers’ expense.