Daily Archives: Nov. 30, 2011

Hostile crowd greets Westar at rate hearing

Westar Energy faced a hostile crowd of about 100 Wednesday night at a public hearing on the company’s request for a $90.8 million rate increase.

Wichita-area residents pressed company executives over their request for a 10.6 percent rate of return for their shareholders, and questioned whether the company is trying to raise rates to make up for lost power sales due to customer conservation — a claim Westar denies.

“We are in a depression and people are hurting very badly,” said customer Janice Bradley. “These are hard times. The number of children who are hungry is increasing and their parents are having a hard time. And Westar sees fit to try to demand more than 10 percent return for their shareholders. This is a shame. Shameful.”

The KCC sets Westar’s rates based on two main factors, its cost of providing power to its 687,000 customers, plus a rate of return granted to allow the company an opportunity to make a profit.

Westar has asked the Kansas Corporation Commission to allow it to increase its rates primarily to offset increased expenses for employee pensions, to expand tree trimming and to offset the effects of a cold summer and reduced power usage during the test year used to determine the company’s cost of doing business.

Many of the approximately 30 people who testified to the commission said they are hurting economically and that Westar should share the pain through a smaller guaranteed return.

“We’re getting screwed, let their shareholders take it too,” said customer Russ Pataky, to applause from the crowd.

After the meeting, Westar CEO Mark Ruelle defended the company’s request for a higher percentage for shareholders.

He said it is necessary for the company to raise its rate of return on equity from the current 10.4 to 10.6 percent to continue to attract investment capital for power plant refits and other improvements.

He also said that while Westar’s guaranteed a return, it’s not guaranteed a profit level. The company’s actual profit level is now about 7 1/2 percent and it’s unlikely to actually reach the 10s anytime soon.

Numerous customers, including veteran utility advocate Margaret Miller, 92, accused the company of penalizing conservation by raising rates to offset reductions in sales.

Shelley Durham, a customer from Hesston, said her most recent bill showed she had cut her energy usage substantially but still paid more on the bill.

“I used 15 percent less kilowatt hours November of this year than last year, and my bill is 41 percent higher,” she said. “In a time period where salaries have remained stagnant over the past few years, it seems irresponsible for Westar to again be requesting a hike in rates.”

Ruelle said that customers were misinterpreting that part of Westar’s request. Rather than a penalty for conservation, it was an adjustment to make sure Westar is paid its costs based on an average year, not an unusually cold or hot one.

During a question and answer session leading up to the formal testimony, customers mocked a Westar PowerPoint slide showing the pace of its increases in the last 10 years.

The company’s vice president of strategy, Greg Greenwood, displayed the slide to show that prices for other products had risen faster than the cost of electricity.

But what customers noted was that the company’s rates were steady and at times even decreasing in most of the last decade before jumping nearly 30 percent since 2007.

The main reason for the increase is that Westar is now allowed to seek increase between rate cases for items such as environmental and transmission costs.

One question that was asked but went unanswered during the hearing was how many of Westar’s employees earn in excess of $100,000 a year.

Judging from applause, consensus seemed to be that Westar was overpaying its executives.

Before raising rates, “why don’t we start by making upper management, of all salaried positions, but especially upper management, taking a six to 12 percent cut in their pay,” said Charlie King.

Roberts and Moran introduce bill to restore state authority over natural gas storage safety

Sens. Pat Roberts and Jerry Moran have filed a bill in Congress to restore state authority to oversee the safety of facilities that store natural gas in underground caverns, in an effort to prevent potentially deadly explosions like the ones that rocked Hutchinson 10 years ago.

Federal agencies have declined to regulate underground storage, leaving Kansas facilities — as much as 270 billion cubic feet of gas — uninspected for the past 19 months.

Roberts’ and Moran’s bill, the Underground Gas Storage Facility Safety Act of 2011, would allow Kansas to restart its program of safety inspections of interstate gas storage facilities. State regulations would be subject to review by the Federal Energy Regulatory Commission.

Those inspections were halted 19 months ago after a Topeka federal judge ruled that the Kansas Legislature exceeded its authority when it passed storage-safety laws in the wake of the Hutchinson disaster.

In that accident, gas leaked from an underground storage facility at Yaggy, migrated seven miles underground, popped up through abandoned brine wells and exploded, destroying a half block of downtown businesses and killing an elderly couple in their east Hutchinson mobile home.

Roberts

“We have already lost two lives in Hutchinson in a 2001 explosion,” Roberts said in a statement issued jointly with Moran announcing introduction of the bill. “The threat is real. Our first priority is to protect citizens from harm. We need strong oversight and in this case, I want it to be the state. I trust our folks there on the ground to protect their fellow Kansans from what could be a real tragedy if ignored.”

Pipeline companies store gas underground by pumping it under high pressure into depeleted oil and gas fields and reservoirs. The gas is held there until it is needed by utility customers across the country.

Interstate fields in Kansas can hold as much as 272 billion cubic feet of gas, nearly 2,000 times as much as the 143 million cubic feet that caused months of havoc in Hutchinson.

Topeka federal district court Judge Samuel Crow ruled that regulation of gas stored for interstate commerce is the responsibility of the federal government.

However, the Department of Transportation, the agency tasked with interstate pipeline safety, has decided not to regulate underground storage.

“The federal government has failed to accept responsibility for monitoring the safety of natural gas storage sites in Kansas, after a federal court judge prevented the Kansas Corporation Commission from carrying out those duties,” Moran said. “This legislation would simply give the KCC the ability to ensure the safety of Kansas citizens when the federal government fails to act.”

“I’m happy, glad to see they did that,” said KCC Chairman Mark Sievers. “It’s helpful because it bridges a gap … that’s really kind of a problem.”

Both houses of the Legislature unanimously voted earlier this year for resolutions urging the federal goverment to restore inspection authority to the state. Due to procedural issues, only the House resolution was actually sent to Washington.

Kansas House Speaker Mike O’Neal, R-Hutchinson, said he was pleased when he saw Roberts take the lead on restoring inspections of the underground storage.

“It’s important for us and very needed,” O’Neal said.

He also said he thinks it’s wise to have the inspections done by the KCC because its inspectors have more experience and localized knowledge to draw on.

“We can handle this ourselves,” he said. “We don’t often look to Washington.”

McGinn

State Sen. Carolyn McGinn, R-Sedgwick, also said she appreciated the U.S. senators’ efforts to restore gas storage inspection.

She headed up a special House/Senate committee that considered the issue between last year’s legislative session and this year’s and that Kansas has seen the results when natural gas escapes from containment.

Roberts said he agrees that the state should have the lead role.

“There is simply a gap in jurisdictions and oversight,” Roberts said. “We ought to close that gap before an accident happens that takes another life or damages property. In the absence of clear federal action, it is the commonsense thing to do to allow states to step in.”

Roberts had announced plans to introduce the bill earlier this month and credited Wichita Eagle coverage for bringing the issue to his attention.