An agreement that would allow Kansas' largest electric company to increase its rates about 4 percent is reasonable for customers while covering the cost of power plant upgrades, attorneys for the utility and other parties told state regulators Monday.
The rate-setting Kansas Corporation Commission had a 90-minute hearing on the proposed deal struck by Westar Energy Inc. with the commission's staff, a state consumer advocacy agency and some of the utility's largest customers. The company's annual rates would rise by $78 million — about half of what it wanted — and most households would see their bills increase between $5 and $7 a month.
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Attorneys representing the parties to the agreement said it was comprehensive and complicated and urged the three-member commission not to change any of its terms. State law gives the KCC until Oct. 28 to issue an order revising Westar's rates, and several attorneys noted that the law encourages settlements, particularly agreements like Westar's where no party formally objects.
"This was frankly amazing, that all these parties were able to come to the table as they did," said Commissioner Jay Emler, a former state Senate majority leader and attorney. "It's very encouraging."
Westar, based in Topeka, has nearly 700,000 customers, and it initially proposed increasing its annual rates by $152 million. The utility sought to recover costs already incurred for improvements mandated by federal air pollution standards, primarily at its coal-fired power plant near LaCygne in eastern Kansas, and for upgrades at the Wolf Creek nuclear power plant about 55 miles south of Topeka.
The company also proposed a five-year, $220 million plan for upgrading its electrical grid and a 10 percent annual profit for its stockholders. The agreement allows grid improvements of $50 million between now and early 2017; it doesn't specifically set a maximum profit, but it's expected to be 9.35 percent.
"This settlement is a balance of diverse interests which, taken together, uphold the public interest," Westar attorney Cathy Dinges told commissioners during the hearing. "Adjusting it this way or that will throw off that balance."
The KCC's staff and the Citizens' Utility Ratepayers Board, a state agency representing residential customers and small businesses, argued for an annual rate increase of less than $56 million. David Springe, the ratepayer board's chief attorney, said there was no question Westar's rates would rise to cover power plant upgrades.
Springe said of the agreement, "On balance, I think it's good for customers."
The agreement also postpones any decision on a proposal from Westar to revise special rates for customers who install solar panels, which drew strong opposition from solar energy advocates. If the KCC accepts the deal, it would consider such issues in a separate case.
Westar had said the 300 customers with existing solar panels would not be affected by its proposed changes. The utility said it wanted to ensure that solar users pay their fair share for Westar's system, so that other customers don't subsidize them.
But green energy advocates said Westar's proposed changes would have eliminated incentives to install solar panels and killed the solar industry in Kansas. Solar energy advocates ultimately did not object to the agreement.
Information about Westar's rate case: http://1.usa.gov/1gOw9HA
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