Westar proposes electrical rate hike

Westar Energy has filed for a rate increase that would raise the average electric bill by $6.44 a month.

The voluminous proposal filed Thursday would bring the company about $91 million in additional revenue next year, a 5.8 percent increase, if approved by the Kansas Corporation Commission.

The proposed rate hike is mainly to cover increasing costs of running the state's largest power system.

But it does include a slight increase in the overall rate of return, the share of electric rate income that Westar gets to provide the company an opportunity to make a profit.

The company's present rate of return is 8.5 percent; the proposal would increase that to 8.68 percent.

"We knew it was coming," said Niki Christopher, a lawyer with the Citizens' Utility Ratepayer Board, the state agency that represents residential and small-business utility customers.

And although CURB will probably argue for a lower rate of return, "I would tell you that's not as much as I expected them to ask for," Christopher said.

Westar spokeswoman Gina Penzig said the increase in rate of return is necessary because the company is expecting to have to invest heavily in environmental improvements to its power plants, and additional return is needed to keep investors interested in purchasing the company's stock.

"It's important that we be able to offer investors a competitive rate," Penzig said.

On the cost side, increasing employee benefit and pension costs are the largest driver of the proposed increase, Penzig said.

No. 2 on the list is lower energy sales during a test year that ended March 31.

Other cost drivers include reduced depreciation of company assets, increased costs to comply with government regulations, and tree trimming, Penzig said.

Westar has been pilot testing a program of accelerated tree trimming in the Wichita area in an effort to keep trees from interfering with lines and causing power failures, she said.

The pilot program has improved reliability, and Westar will be asking the commission for revenue to expand it throughout the system, Penzig said.

Westar is the dominant power provider in Kansas, with 687,000 customers.

Its filing Friday touches off a lengthy process in which the company will have to prove its costs and justify its proposed rate of return to the commission.

Consumer advocates and commission staff will analyze the proposal and provide testimony on changes they think should be made in the company's proposal.

The commission may also opt to hold one or more public hearings to get grassroots feedback on the proposed increase.

Commissioners have 240 days to consider Westar's rate increase proposal. A final decision is expected in April with new rates to take effect in May.

Christopher said a big change this year is that many of Westar's costs, including big-ticket items such as environmental and transmission upgrades, are now broken out and considered separately. In years past, those would have been part of the overall rate request, she said.

"So many things have been taken out of the base rate that you can't tell (total rate impact) from just a rate case," Christopher said.

Westar's proposed rate base is $3.4 billion, excluding $722 million of transmission expenses and $393 million of environmental costs, according to the company's filing.

Westar has already asked the commission for a separate proceeding to follow the rate case, specifically focused on recovery of environmental improvement costs proposed at the aged La Cygne power plant, near the Missouri border about 60 miles south of Kansas City.

The plant is jointly owned by Westar and Kansas City Power and Light Co. and improvements there are expected to cost Westar customers about $650 million in rates.