September 29, 2008
CURB trims fat from Westar rate request, encourages conservation
Today, the Citizens' Utility Ratepayer Board (CURB) filed Direct Testimony with the Kansas Corporation Commission in response to Westar Energy's request for rate increases of $87.58 million for its Westar South division customers and $90.04 million for its Westar North customers. (Docket No. 08-WSEE-1041-RTS).
Andrea Crane, CURB's accounting consultant, recommended that the KCC limit the increases to $56.7 million for Westar North, and to $44.77 million for Westar South, figures which include $27 million in environmental expenditures that has already been approved by the KCC for inclusion in rates.
While Ms. Crane acknowledged that Westar's recent investments in additional generation justify additional revenues, she objected to the company's claims for executive compensation and benefits, costs of construction for plants not yet in service, storm-related costs and the level of profits requested for shareholders, stating that they were excessive. She recommended a 9.59% return on equity for shareholders, which would pare $16.4 million from the Westar North increase, and $15.3 million from the Westar South increase.
Michael Majoros, CURB's depreciation consultant, recommended removal of approximately $6 million in depreciation revenues from the rates of both Westar divisions, citing Westar's failure to provide sufficient evidence to support its requested increase in depreciation rates for both divisions.
Stacey Harden, CURB's regulatory analyst, recommended numerous revisions to Westar's energy-efficiency programs to improve accountability and cost-efficient use of funds contributed by ratepayers. She also recommended that the KCC revisit its approval of Westar's so-called "Green Tariff" because no additional green energy will be provided with the revenues collected under the tariff beyond that which is already being paid for by Westar's customers.
Brian Kalcic, CURB's rate design analyst, recommended a rate structure designed to accomplish two broad goals of the Board. First, so that low-usage customers and fixed income seniors continue to have access to affordable electricity as utility costs increase, the rate for the first 900 kWh of use is maintained at an affordable level. Second, to encourage higher-usage customers to invest in conservation measures to reduce their usage, the rate for usage above 900 kWh is more expensive.
"The cost of providing electric service is increasing as customers are putting more demand on the electric utility system," said David Springe, Consumer Counsel for CURB. "The Board's recommendations in this case recognize that rates need to go up to reflect increased costs, but we are also recommending that the Commission trim the fat from shareholder profit and executive compensation."
The Board's rate design proposals, he said, are designed to help reduce costly demand on utility facilities. "The Board believes it is time to stop talking about conservation and start acting to achieve conservation, Springe said. He noted that, "The existing rate structure is a legacy from when utilities had excess base load generation and consumption was thus encouraged. CURB's rate design, if adopted by the KCC, will encourage conservation and reduce the growth in our usage, while maintaining affordable rates for those most challenged by today's economic environment."
Springe also warned that Westar customers are facing other rate increases that will appear on customer bills, regardless of the outcome of this case. According to Springe, the cost of natural gas to run the new Emporia Energy Center and over $20 million per year of wind energy purchases are being added to the fuel cost adjustment on consumers' bills. He added, "The cost of transmission upgrades currently being constructed is going to show up in one line item on the Westar bill, and expenditures on environmental upgrades to Westar's coal plants will show up in another line item."
"Regardless of how much of the $177 million increase requested by Westar will actually be granted by the KCC, consumers will see tens of millions of dollars of rate increases through these other line-item charges created by the legislature and the KCC," said Springe.