October 27, 2012

Gas bills to rise about $2 under proposed Kansas Gas Service settlement

Kansas Gas Service rates would rise about $2 a month under a settlement agreed to Friday by the company, consumer advocates and state regulatory staff.

Kansas Gas Service rates would rise about $2 a month under a settlement agreed to Friday by the company, consumer advocates and state regulatory staff.

Under the settlement, Kansas Gas would get to raise rates by about $10 million a year overall, about a third of the $32 million net the company had been seeking.

The settlement is not a done deal. It will still require approval by the three-member Kansas Corporation Commission.

However, the KCC’s advisory staff has agreed to the settlement and its recommendations generally carry a lot of weight with the commissioners.

The third major player in the rate case, the Citizens’ Utility Ratepayer Board, has also signed off on the settlement.

“I think it’s a pretty good deal,” said David Springe, chief consumer counsel for CURB, the state agency that represents residential and small-business customers on utility issues. “If you look at the numbers on balance, it’s a pretty good settlement for our customers. That’s why we decided to sign it.”

Dawn Ewing, a spokeswoman for Kansas Gas, said the company believes the settlement is “in the best interest of our more than 630,000 customers.”

She said it gives the company enough income to continue safe and reliable gas service while “providing an opportunity to earn a return on our investment” in the gas system.

In a filing to the commission, the three groups agreed that their settlement would result in fair rates.

“The ‘total effect’ of the terms of the agreement results in just and reasonable rates and represents an equitable balancing of the interest of all the parties,” the filing said.

The fourth group that officially intervened in the case, a company called Constellation NewEnergy, did not participate in the settlement negotiations, but has indicated it won’t oppose commission approval of the pact.

Technically, the overall rate increase in the settlement is about $28 million. But customers are already paying the equivalent of $18 million of that on their current bills through line-item “riders” that reimburse the company for its investments in pipeline replacement and property tax increases. The settlement would shift those charges to regular rates and eliminate the rider surcharges for now.

In the settlement, Kansas Gas abandoned an effort to shift more of the cost of rates from corporate customers to residential ratepayers.

In addition, the gas company gave up on a proposal for “revenue normalization,” essentially a guarantee that would have allowed rates to rise if gas sales were to fall and the company didn’t make as much money as it’s allowed to.

The settlement does not clearly delineate the effect on executive bonuses or the company’s return for shareholders – two issues that had loomed large in the debate on the proposed rate increase.

That, said the settlement filing, is by design.

The filing said negotiations “were tough, thorough, and comprehensive,” resulting in “a compromise that satisfied each (party) in all respects. This was done, in part, by agreeing to a revenue requirement (for the gas company) without explicitly stating the resulting conclusions on every item in dispute.”

Springe said the rate of return for shareholders would fall somewhere between 8.65 and 10.08 percent, depending on how the gas company balances its capital structure between stocks and debt.

As for the executive bonuses, Springe said, they weren’t specifically outlined, “But if you look at the numbers, it’s hard to argue there’s much there (for increasing bonuses).”

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