September 15, 2013

Westar Energy says it will continue rate plan battle

Westar Energy is vowing to fight on with a proposal to provide discount rates for new and expanding businesses and rate assistance for low-income customers, although it faces opposition from both state regulatory staff and the state’s consumer-protection agency.

Westar Energy is vowing to fight on with a proposal to provide discount rates for new and expanding businesses and rate assistance for low-income customers, although it faces opposition from both state regulatory staff and the state’s consumer-protection agency.

The two programs are proposed as part of a larger rate case where Westar is seeking a $31.7 million increase in rates. The company also proposes to rebalance its rates, which would mean increases for residential and small-business customers and lower rates for major commercial and industrial users.

The case is scheduled to go to a court-like hearing before the KCC in Topeka on Sept. 26. It already has had two public hearings where customers were allowed to comment; most didn’t like Westar’s plans.

The case is a follow-up to a 2012 rate case in which the KCC granted Westar a $50 million increase.

Both the KCC staff and the Citizens’ Utility Ratepayer Board, the state agency that represents residential and small-business customers, have raised legal objections to discussing rate discounts for new business and assistance for poor customers in what is supposed to be an “abbreviated” rate review.

“Westar’s proposed low-income assistance fund and economic development rider are outside the scope of the present abbreviated rate case proceeding and their inclusion should not be permitted,” concluded a KCC staff legal brief filed late last week.

David Springe, chief consumer counsel for CURB, said his agency agrees with KCC staff on that issue. While a plan to help low-income people with their power bills might not be a bad idea, “It’s not the right case and not the right time,” he said.

Despite KCC staff and CURB opposition, Westar plans to continue seeking commission approval for the programs, said Jeff Martin, the company’s vice president of regulatory affairs.

He said Westar’s legal arguments will be laid out in a rebuttal this week and they will pretty much mirror points made in written testimony from Terrence Wilson, Westar’s director of customer and community relations.

Wilson wrote that offering discounts will make it easier for new business to locate in Kansas and benefit all customers by bringing extra revenue into the system. Discounts would be temporary, but the benefits would be long-term, he said.

He also said the company will only offer the discounts when government or an an economic development agency identifies utility costs as a problem in getting a company to come to Kansas instead of going elsewhere.

“In other words, if Westar is participating in the process, it has already been determined by the state or local organization that electric service is important to the business's decision to locate in Kansas,” he wrote.

Westar can already discount rates for new and expanding business customers, but has chosen not to because it would decrease the company’s bottom line. In a 2005 case, the commission ruled that if Westar offered the discounts, 60 percent of the cost would have to come out of the company’s profit and only 40 percent could come from ratepayers.

Under Westar’s current proposal, Westar would fund all the business discounts and low-income assistance from part of the money that the company makes selling power to other utilities. At present, that income is used to buy down generator fuel costs, which benefits all customers.

In addition to objecting to including low-income assistance in the current rate case, the KCC staff is questioning whether it’s legal.

Previously, the commission has rejected rates based on customer income as discriminatory, said the report by KCC litigation counsel Ray Bergmeier. He also said the plan isn’t detailed enough to analyze it for legality.

“Westar’s application is lacking information related to how the low-income assistance fund will be implemented, which customers will qualify, how much revenue those customers will receive, and whether those customers will receive benefits from this program in the form of reduction to their bills or credits to their accounts,” he wrote.

Wilson testified that Westar’s plans wouldn’t lower rates for low-income customers, but would provide them with assistance to pay the regular rates. The commission has allowed that in past cases, he said.

Martin said Westar disagrees that consideration of the program should wait.

“We still believe that the time is right for a low-income assistance type of program,” he said.

By themselves, the new-business and low-income assistance programs would only add about $3 to $4 a year to customers’ bills, he said.

That would be only a small fraction compared to the rate increase proposed in the underlying case, where Westar wants to raise rates to pay for environmental upgrades at its coal-fired power plant in LaCygne.

The most controversial aspect of Westar’s plan is a proposal to rebalance the share of overall rates paid by different customer classes, with residential and small-business ratepayers seeing an $83.5 million increase while high-usage commercial and industrial businesses and school districts will share a $50 million cut.

The proposal would add $7.50 a month to the average residential electric bill — nearly a 9 percent increase — according to KCC documents. Small-business customers’ bills would rise a total of $21.5 million, about a 6.2 percent increase.

While rates would rise for homeowners and small business, they would drop for larger users:

• Medium-sized businesses would see their bills go down by $18.5 million, or 6 percent.
• Large industrial customers’ bills would drop by $17.4 million, about 8.4 percent.
• Two large business customers, on special contracts with the power company, would split a reduction of $10.6 million, or 15.1 percent.
• Public school district bills would be reduced $3.6 million, about 7.6 percent.

Westar says the rebalancing is needed because big businesses are paying more than what it costs to serve them, while residential and small-business customers are paying less.

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