Daily Archives: April 18, 2012

Westar gets $50 million rate hike; state consumer advocate says regulators are ‘cash register’ for utilities

    Springe

    The Kansas Corporation Commission has approved a $50 million increase in electric rates for Westar Energy, pleasing the company but angering state consumer advocates.

    The commission accepted a settlement agreement made between the power company, KCC staff and large commercial and industrial consumers, that will add $3.54 a month to an average 900 kilowatt-hour electric bill.

    The decision was immediately denounced by the Citizens’ Utility Ratepayer Board, the state agency that represents residential and small-business customers. CURB was the only party to the case that opposed the settlement.

    “The KCC has become a cash register for the utilities,” said CURB’s chief consumer counsel, David Springe. “It’s clear the commission staff got in bed with Westar on this one.”

    About $42 million of the $50 million increase will be paid by residential and small-business customers. The increased rates will start showing up on bills in early May.

    Westar spokeswoman Gina Penzig said the settlement approved by the KCC “involved some significant concessions on the part of all the parties involved, including Westar.”

    Although the agreement was negotiated behind closed doors and the commission referred to it as a “black box” settlement, Penzig said the rate case was a “very transparent process” and Westar feels it resulted in a fair decision.

    “Consumers were provided with a fair view of what expenses were driving our initial rate request and ultimately the approved rate request,” Penzig said.

    CURB’s main objection was that the settlement grants Westar a 10 percent return on its stock, which Springe said is too high in the current economic climate.

    He quoted an article in Barron’s in which Bill Gross, cofounder of the Pacific Investment Management Co. — the world’s largest bond investor — said utilities “pay big dividends because they continually are granted a 10 percent return on equity by regulators in a world where returns are moving much lower. After earning 10 percent, they can pay out 4 or 5 percent to shareholders.”

    Of 13 stock analysts following Westar, 12 recommend buying or holding the stock, with only one advising to sell, according to the Wall Street Journal’s MarketWatch service.

    In a news release announcing the rate increase, the KCC noted that the settlement was about 45 percent less than the $90.8 million increase Westar originally requested.

    The commission’s order said the 10 percent return on equity is “within the zone of reasonableness.”

    “No evidence was presented that suggested that selecting a limited 10.0% ROE would (1) adversely impact the financial ability of the public utility to continue to provide service; (2) constitute an excessive burden on either current or future consumers; or (3) be unduly discriminatory,” the order said. “When viewed in light of the record as a whole, the (settlement agreement) conforms to applicable law and will result in just and reasonable rates that are in the public interest.”

    Springe, however, said the $50 million is only one of 13 rate increases Westar’s gotten from the commission since January of 2009, including a recent order to allow the company to begin collecting higher rates while the commission considers a permanent increase in charges for transmission expenses.

    Springe estimated that taken together, the increases have hiked summer rates by about 40 percent in the past 3 1/2 years for Westar’s northern division, the former KPL. A 1,500 kilowatt hour bill there will have gone from $123 a month to $173, Springe said.

    The southern division, formerly KGE, had higher rates to start so a similar bill has gone from $138 to $173, a 25 percent increase, he said.

    Still pending is another $19.5 million for environmental upgrades, which would be the 14th rate increase since 2009, Springe said.

Republican senators want bioscience funding to flow

TOPEKA – The Kansas Bioscience Authority has not received payments from the state since November and it is creating a “cooling effect” on its ability to attract high tech bioscience companies to the state, a KBA official said today.

Gov. Sam Brownback froze funding to the KBA earlier this year. And the uncertainty led Sen. John Vratil, R-Leawood, this morning to suggest the lawmakers require the state treasurer to give the KBA money on specific dates each quarter to ensure it has money to spur bioscience projects. Vratil’s suggestion came during a Senate Ways and Means Committee hearing about the state budget.

“The money is supposed to be paid to the Bioscience Authority, and I want it paid to the Bioscience Authority,” Vratil said. The proposal will likely become part of budget negotiations between the House and Senate.

The KBA has received many calls from companies that are concerned about the frozen funding, but so far the doubts have driven any companies away, said KBA spokeswoman Sherlyn Manson. She said the KBA has enough money to cover current obligations, and it announced $3.3 million worth of investments in human and animal health bioscience in March.

But for future investments the KBA is counting on the state to release $22.7 million to comply with the 2004 Kansas Economic Growth Act that led to the creation of the KBA.

Meanwhile, the doubts have created a “cooling effect,” she said.

Manson said the KBA has received no assurances from Brownback’s administration that the money will be released.

“Kansas needs to reaffirm its commitment to the KBA,” she said.

Brownback spokeswoman Sherriene Jones-Sontag said the administration isn’t aware of any funding issues with KBA, and she said the $22 million will remain on hold until the legislature decides what they want to do with it.

Sedgwick Republican Sen. Carolyn McGinn, who is chair of the ways and means committee, said eventually the companies that the KBA is trying to steer toward bioscience ventures will have questions about the state’s commitment to the KBA.

In January, Gov. Sam Brownback withheld $22 million in funding earmarked for the KBA amid heated debates about results of a forensic audit.

The audit confirmed former KBA chief executive Tom Thornton had misspent public money on artwork for his home and on a plane ticket for a job interview. It also showed he had destroyed documents. But it found few problems with the KBA’s efforts to attract high-tech biological science companies to Kansas.

Wichita Republican Sen. Susan Wagle and others have said the audit downplayed problems at the KBA. Meanwhile, the House last month unanimously approved a bill that would try to prevent conflicts of interest among KBA employees and board members. The Senate sent the bill to a conference committee to negotiate changes to the bill.