Daily Archives: Nov. 5, 2012

Kansas Gas and consumer advocates urge approval of settlement to increase rates

TOPEKA — Lawyers representing Kansas Gas Service and the state’s utility-consumer protection agency found themselves in a rare state of total agreement Monday, arguing that a settlement slightly raising homeowners’ natural gas rates is in the best interest of the company and the public.

“I think it’s a good settlement for all of us,” said Niki Christopher, a lawyer for the Citizens’ Utility Ratepayer Board, the state agency representing residential and small-business customers. “I would echo virtually everything Walker (Kansas Gas Service lawyer Walker Hendrix) said in terms of reasonableness of the settlement. … It’s a much better deal than we were proposed by the company originally.”

Kansas Gas had originally sought a net rate increase of $32.7 million. The company settled for $10 million.

On Monday, Kansas Gas, CURB and the Kansas Corporation Commission’s advisory staff urged the three-member commission to accept the settlement. The commission is required to make a final ruling by January 14.

In settlement negotiations, “we tried to make it as fair as we possibly could,” said Hendrix, a former chief consumer counsel with CURB. He called the settlement “fair and equitable in terms of an end result.”

That end result is an increase of about $1.99 a month next year for the average residential gas customer. Because of the way the gas company’s property tax increases are figured into the rates, the rates are expected to decline slightly in 2014, representing about a $1.46 monthly increase from today’s rates.

Despite the rate increase, homeowners will likely still see overall gas bills that are lower than in recent years, because of substantial drops in the price of natural gas itself.

Each gas bill contains two components — the cost of gas and the cost of having Kansas Gas Service run the mammoth piping system that delivers the gas to 632,000 customers.

The cost of gas is a pass-through cost to customers and rises and falls with the price of gas on the open market. Gas costs are currently very low compared to years past.

The delivery rates being considered are based on the gas company’s costs of providing service, plus a rate of return to allow the company the chance to earn a profit.

Because Kansas Gas has essentially a monopoly within its service area, the delivery rate must be approved by the Kansas Corporation Commission.

Reaching a settlement meant that an originally scheduled three days of testimony in the court-like utility hearing could be collapsed down into about two hours.

The only substantial question raised by commissioners came from Chairman Mark Sievers, who noticed there are some fairly substantial rate increases proposed for some business customers in western Kansas who buy gas directly off the pipelines.

Sievers questioned whether the interests of those western Kansas customers have been adequately represented in the settlement negotiations between the company, CURB and KCC staff.

If those consumers disagree with the settlement, “sometimes the way they express that disagreement is they go to the Legislature,” he said.

Justin Grady, chief of accounting and financial analysis for the commission, noted that if they had wanted to, the western Kansas businesses could have intervened as interested parties in the rate case, but chose not to.

That, he said, indicates that those companies “internally made a business decision that ultimately, this is not going to be so bad for us.”

The settlement does not specify what the gas company can do in terms of executive and management bonuses.

That had been a major issue earlier, because $8 million of the original rate increase request was earmarked for bonuses.

Under questioning from Commissioner Thomas Wright, the gas company’s manager of regulatory affairs, David Dittemore, noted that the overall increase is only $10 million total and characterized it as “highly unlikely” that much of that would be available to be used for bonuses.