Topeka Westar Energy’s contention that it needs at least a 10 percent shareholder return as part of a rate increase drew skeptical questions during two days of testimony before the Kansas Corporation Commission.
Kansas’ largest utility would get a $50 million rate hike, including a return for shareholders of 10 percent of company revenue, if the KCC approves a settlement reached between Westar, the KCC staff and the company’s large commercial and industrial customers.
Commissioner Ward Loyd and Chairman Mike Sievers on Tuesday pressed the commission’s chief rate analyst on how much Westar needs to attract investments necessary to keep the utility profitable, The Wichita Eagle reported.
That came after Westar chief executive Mark Ruelle testified Monday that nothing less than 10 percent would keep the utility competitive with other utilities. He said other Midwest utilities whose rates have been set in the past 13 months got more than 10 percent.
However, the commissions’ managing financial analyst, Adam Gatewood, testified that a return below 10 percent would not cause dire consequences or raise capital costs for Westar.
“I do disagree with the (Westar) view that 10 percent is a bright line we have to never touch,” said Gatewood, whose analysis put an acceptable return anywhere between 9 and 10 percent. He recommended 9.5 percent.
The Citizens’ Utility Ratepayer Board is challenging the proposed settlement, saying it is not fair to residential and small-business utility consumers. If approved the settlement would raise residential rates between 5 and 6.5 percent.
The commissioners could accept the settlement, make changes to it, or throw it out and set the rates themselves. The commission is required to set Westar’s new rates by April 23.
Westar spokeswoman Gina Penzig said the company believes anything less than a 10 percent return could discourage investors and reduce Westar’s stock price, particularly when compared with other utilities.
“If you start to fall noticeably below the pack, it’s going to raise some eyebrows,” she said.