Westar Energy prepares to give $38 million back to customers

Westar Energy collected $38 million too much for fuel costs last year, so the company will carve about $1.26 per month off bills this year, according to a filing with the Kansas Corporation Commission.

The money for the customer rebates will come from the overcollection of Westar’s Retail Energy Cost Adjustment rider, a charge that pays for fuel for Westar’s generating plants.

David Springe, chief consumer counsel for the Citizens’ Utility Ratepayer Board, said “it means they’ve collected more than they should, and so they’re going to give it back.”

The fuel cost is supposed to be a direct pass-through to customers; in essence, they pay the cost of Westar’s fuel on a monthly basis, and the charge fluctuates month to month.

However, the cost is “trued up” once a year after the actual fuel costs for the previous year are known. If Westar collects too much, customers get a rebate. If Westar collects too little, customer costs are increased to repay the company.

The fuel adjustment is separate from Westar’s requests for base-rate increases. Early this month, the company filed a rate case seeking an additional $125 million a year, which translates to about $13 more on the average customer’s bill.

Westar officials were unavailable for comment Friday, but details were included in testimony attached to the company’s KCC filing.

In 2014, Westar charged customers $510,472,276 for the fuel charge. But the company spent only $479,249,231, according to testimony by Westar rate analyst Rebecca Fowler.

The monthly fuel charge generally adds 2 to 2.5 cents per kilowatt hour to consumers’ bills. Westar is proposing to reduce the charge by about 0.15 cent per kilowatt hour going forward. That works out to about $1.26 for an average customer using 800 kilowatt hours a month.

The utility ratepayer board, the state agency that represents residential and small-business customers, has filed to intervene. Springe noted that the $38 million overcollection represents about 8 percent of Westar’s actual fuel cost.

“That’s probably higher than we’d like to see it,” he said.

Springe said it’s beneficial for everyone if the money Westar recovers for fuel cost is close to the amount that it actually spends on fuel.

“In this instance, they took $38 million more than they needed out of our pocketbooks, and we (consumers) don’t like that,” he said. “Nor would we want them to be $38 million undercollected next year and we have a $1.27 upcharge for the following year.”

In 2014, Westar changed the way that it sells power, which may have contributed to the overcollection for the year.

Instead of generating power and selling it directly to customers, Westar now sells all the power it generates to the Southwest Power Pool and then buys back enough to serve its customers, according to written testimony by Jerry Kroeker, Westar’s executive director of fossil fuels.

The power pool is a consortium of 80 public and investor-owned utilities spread across Kansas, Oklahoma and seven other states.

The sharing arrangement allows all those utilities to feed the pool with the power they can generate the cheapest. That reduces the need for utilities to fire up costly “peaking” generators to meet the load in high-demand periods, Kroeker’s testimony said.

In addition,Westar caught about a 13 percent break on the price of fuel at the Wolf Creek nuclear power plant. The cost of nuclear fuel dropped after a court order discontinued a federal waste disposal charge that Wolf Creek has paid since it opened in 1983, Kroeker testified.

This story was originally published March 22, 2015 at 5:43 PM with the headline "Westar Energy prepares to give $38 million back to customers."