The Kansas Court of Appeals on Wednesday affirmed a decision by state utility regulators to reduce Kansas City Power & Light Co.’s requested profit margin in a rate case decided last year.
The court decision could have statewide and even interstate implications for other power companies, because the rates of return for utility stockholders are partially based on what comparable companies are receiving.
A three-judge panel ruled that the Kansas Corporation Commission did not act improperly when it pared down the KCP&L rate request from $67.3 million to about $48.7 million.
For customers, that brought the rate increase down from 12.5 percent to 9 percent.
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The court also ruled that the decision to trim KCP&L’s requested profit margin was backed up by credible expert evidence in the rate-setting case, even though KCP&L’s expert disagreed.
We cannot fault the Commission for being reasonable.
Kansas Court of Appeals
KCP&L had sought to recover its costs of providing power, plus a 10.3 percent “return on equity,” which is in essence the profit pool for the company’s stockholders.
The commission reduced that to 9.3 percent after hearing testimony from witnesses representing the company, the commission staff and the Citizens’ Utility Ratepayer Board, the state agency that represents small consumers.
“In summary, all three experts used the same general well-recognized economic models for estimating the ROE. Their opinions simply differed,” said the court ruling, handed down by Judge Stephen Hill.
In contrast to KCP&L’s 10.3 percent request, commission staff analyst Adam Gatewood testified that a range of 9 to 9.5 percent would be reasonable. CURB consultant J. Randall Woolridge recommended 8.55 percent.
“Although KCP&L and (KCP&L expert witness Robert) Hevert challenged the inputs and assumptions relied upon, the Commission's decision is not arbitrary or capricious,” the ruling continued. “We cannot fault the Commission for being reasonable.”
A KCP&L spokeswoman said she could not immediately comment on the decision.
KCP&L serves approximately 240,000 customers in Kansas and 560,000 in Missouri.