KCC approves rate freeze, rebates for Kansas Gas customers as part of Oneok breakup

05/19/2014 5:44 AM

08/06/2014 9:55 AM

State utility regulators on Thursday approved a reorganization of natural gas giant Oneok Inc. that includes a three-year rate freeze and some small rebates to Kansas Gas Service customers.

Oklahoma-based Oneok is planning to spin off Kansas Gas and the company's gas-delivery businesses in Oklahoma and Texas into a separate utility firm.

The Kansas Corporation Commission was the last of the three state regulatory board approvals needed and the transaction is expected to close by the end of March, said company spokeswoman Dawn Ewing.

The new company will be known and traded on the stock market as One Gas, although customer bills here will retain the Kansas Gas Service name.

The new company will have more than 2.1 million customers in three divisions: Oklahoma Natural Gas, 847,000 customers; Texas Gas Service, 634,000; and Kansas Gas Service, 630,000.

As part of the reorganization, Kansas Gas has agreed to freeze its base rates for the next three years and provide customers with an annual rebate of $5.34 each April during that period.

The rebates total about $3.4 million a year. That reflects reduced pension costs and Oneok writing off remaining costs from the 1997 transaction when it purchased Kansas Gas Service from Western Resources, now Westar Energy.

Gas customers’ bills will continue to fluctuate because the commission only regulates the rates the company charges for running the system that delivers gas to homes and businesses. Bills rise and fall with the price of natural gas on the open market and some other variable costs, such as property taxes, that are passed through to consumers.

In addition to the rate freeze, the company agreed to:

• Limit increases in the company’s Gas Safety and Reliability Surcharge to 40 cents per month per year. The surcharge, now 15 cents a month, pays for improvements such as replacing leak-prone cast-iron pipes.
• Donate $1 million, plus $200,000 for administrative costs, to charities to help low-income people weatherize their homes to save energy.
• Follow quality of service standards, including billing rules and benchmarks for answering customer calls and responding rapidly to leak reports. One Gas will face financial penalties if it doesn’t meet those standards.

Ewing said those benefits will be unique to Kansas customers, as neither Texas’ nor Oklahoma’s utility commissions required them.

The KCC staff, Oneok and Kansas’ consumer-protection agency, the Citizens' Utility Ratepayer Board, had reached agreement on the settlement of the case and testified in favor of it last week.

Commissioners approved the settlement with little discussion and no dissent.

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