State officials and consumer advocates have reached accord with Westar Energy to raise the company’s electric rates by about $78 million, roughly half what Westar initially requested when it filed for rate review in March.
The new rates will represent approximately a 5.3 percent increase in monthly bills for residential customers, about $5 to $7 a month on average, state and company officials projected.
Westar withdrew proposed extra charges for customers who install solar energy panels on their homes. That will be taken up in a separate case by the Kansas Corporation Commission, which regulates electric rates.
Westar and the other parties to the case announced the agreement Thursday, four days after they embarked on settlement talks – breakneck speed as utility rate cases go.
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“There wasn’t a lot of time (for settlement talks), so everybody got in there and worked really hard to find an agreement,” said Westar spokeswoman Gina Penzig.
“It’s a good deal,” said David Springe, chief consumer counsel for the Citizens Utility Ratepayer Board, the state agency that represents residential and small-business utility customers. “As opposed to $152 million, the settlement is $78 million. That’s considerably less.”
Also, $5 million of the increase is a set-aside for Westar workers’ pensions and could come back to customers if the company’s pension investment funds perform well, Springe said.
Much of the Westar increase is to pay the company back for the cost of environmental improvements to the La Cygne coal power plant and modifications to extend the life of the Wolf Creek nuclear plant at Burlington.
The settlement does not specify a rate of profit return for Westar’s stockholders. However, Springe said it calculates out to about 9.35 percent, substantially less than the 10 percent Westar initially requested.
Other key parts of the settlement include:
▪ Raising the standard monthly service charge from $12 to $14.50 a month. That charge will stay in place until the conclusion of Westar’s next rate case, which is likely three to 3 1/2 years away. Westar had initially asked to raise the customer charge $5 a month per year, to $27 beginning in the fourth year and continuing after that.
▪ Westar withdrew a request for a $217 million, five-year plan to upgrade its energy delivery system. Instead, the company will get a pool of $50 million for distribution upgrades.
▪ Westar will eliminate the monthly bill charge for recovering environmental costs. Environmental upgrades will now be built into the regular rates.
▪ Westar will reduce the cost for wind power subscription by 75 percent, so customers who want to purchase 100 percent of their power from that renewable energy source will be able to do so for as little as $2 a month extra.
▪ Westar will start a program to build a solar energy plant and sell subscription power to customers who want to participate in solar generation but can’t or don’t want to put panels on their home.
Solar energy has been a point of contention throughout the rate case, and the settlement doesn’t settle that. Customers who use solar panels are also connected to the Westar system so they have electricity when the sun isn’t shining.
The company argued that solar customers should have to pay a higher monthly charge to carry their fair share of the fixed costs of running the power system because they spend much less on Westar power than the average consumer.
Solar advocates and industry representatives countered that the increased charges were unjustified and would strangle the rapidly growing home-solar industry.
Under the settlement, that becomes an argument for another day. The pact envisions opening a separate solar-only docket to examine what, if any, extra charges solar customers should pay.
Solar customers will continue to pay the regular residential rates until that proceeding is finished, Springe said.
Solar-power advocates were allowed only a limited role in the Westar rate case and weren’t allowed to participate in the settlement talks, Springe said. As a result, they are the only parties that haven’t agreed to the settlement, he said.
The commission, which has the final say on Westar’s rates, has until late October to issue an order accepting or rejecting the settlement between the parties.
Reach Dion Lefler at 316-268-6527 or firstname.lastname@example.org.