Federal regulators have approved a settlement reducing Westar Energy’s profit from transmission charges, a decision that will eventually mean millions of dollars more in customers’ pockets.
“The Settlement appears to be fair and reasonable and in the public interest,” the Federal Energy Regulatory Commission wrote in its order issued Wednesday. “Refunds and adjustments shall be made pursuant to the Settlement.”
But don’t expect immediate rate relief. Although the main question has been settled by the order, it will take several months for Westar and government regulators to set new, lower rates.
The settlement is specific to Westar’s “Transmission Delivery Charge.” The charge is a separate line item on customer bills – added onto basic rates – that compensates Westar for the cost of transmitting electricity from power plants to customers.
Rate meeting set for Thursday morning
The order comes one day before the Kansas Corporation Commission is scheduled to decide on Westar’s request for an increase in the Transmission Delivery Charge for the coming year.
Westar spokeswoman Gina Penzig said the company plans to go forward with its current request for a $25 million transmission increase, to start with bills mailed Friday. That will raise bills about $4 a month for the short term.
But Westar will then accrue the excess earnings in anticipation of filing for new rates later this year. The new rates will be lowered to account for a lower return for stockholders, plus customer refunds going back to Aug. 20, 2014, when the KCC first filed a complaint that Westar was overearning on the transmission charge.
“With the FERC’s approval (of the settlement), those refunds are a little bit closer to reaching customers,” Penzig said. “There are still some significant steps that need to be completed.”
Refunds will be handled as reductions in future bills, Penzig said.
That means customers who have been overcharged since 2014, but who have since moved out of Westar’s service area, won’t get a share of the refunds.
The Kansas Corporation Commission is expected to rule Thursday on Westar’s current request for an increase. It may have no choice but to approve it, pending Westar’s refiling with refunds.
State law mandates that the KCC grant Westar’s transmission charge each year, provided that it’s properly calculated. Increases are generally automatic after a cursory review at the KCC.
Calculations by a KCC lawyer two weeks ago estimated that the $25 million increase would be about $18 million too much if the settlement were approved.
Any increase in the transmission charge would be in addition to the $78 million increase Westar got in a general rate case in September.
11.3% Westar Energy’s current return for stockholders on transmission rates
9.8% Westar’s new rate for stockholder return
The transmission rate includes Westar’s costs of delivering power, plus a set return to allow the company the opportunity to make a profit for its stockholders.
The federal commission has ruled that Westar’s current return, 11.3 percent, is excessive. The settlement knocks that down to 9.8 percent.
At the time it filed the complaint, the KCC said rates could be reduced $15.8 million annually if it was granted.
The KCC commissioners are scheduled to discuss the situation in a meeting at 10 a.m. Thursday at their Topeka headquarters.
Members of the public can watch the meeting live via teleconference at the KCC office at 266 N. Main, Suite 220, Wichita.