Westar Energy has threatened to shelve plans for a new 300-megawatt wind power project if the Kansas Corporation Commission doesn’t approve all of a 1 percent profit premium it wants.
The extra revenue for wind power appears to be allowable under a 1978 Kansas law passed to encourage development of alternative energy. But as consumer advocates noted in rate hearings last week, investing in alternative energy was much riskier in 1978, when wind power was a fledgling industry. Westar faces little to no risk in investing in wind today, especially with rate guarantees from the KCC.
Westar deserves some extra incentive for moving into wind, but utility officials might not deserve the full rate increase they’re demanding.
Posted by Randy Scholfield
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52 Comments
That’s right Weststar. Bully and threaten. The Kansas Repubs will buckle and let you rape your engery loving clients.
Wind energy is not a risk, but a necessity now. It has shown itself to be environmentally friendly, except for the occasional stupid bird wondering into blades. The extra money Westar wants is greed.
I agree Randy. The KCC should ‘run the numbers’ and determine a good and reasonable profit and set the rates based upon that. Westar deserves to make a good return upon their investment; however, as a regulated monopoly, it should not be excessive.
Westar shareholders and executives should be reminded that they have never lost money operating as a utility; their revent financial difficulties (from which they are still recovering) are a result of their foray outside of that area os expertise.
It’s simply corporate audacity.
People are pro wind and might, just might, subsidize Westar’s investment, so they go for it.
Every corporation in the world wants the taxpayer to subsidize its investment. Every corporation wants — and many often get — corporate welfare.
Socialize the risk but keep the profits private. The the legacy of 30 years of Republic Party rule.
If Westar wants to play this little game? Well let’s change the rules on them.
How about a penalty on them if a percentage of their power is NOT wind generated.
Wait you say. They will just pass the cost on to the rate payers!
Nope couple the requirement that a percentage of their power be wind generated with a freeze on what they can charge.
Good suggestion, “J R” –
And it’s a classic *conservative* opportunity for capitalism to work the way it’s supposed to.
If the George WMD Bush economy doesn’t collapse (not necessarily the odds-on favorite bet), there should be plenty of investors who could step in and build wind farms in Kansas.
Ben at least sounds reasonable here.
The rest of you greens?
Good grief, a company tries to do what you want, and you still bitch bitch bitch!
Utility companies are taxed higher than Commercial property, for property tax purposes.
Utility companies are the largest taxpayers in every property tax district, and every tax unit, in Kansas.
You say that they are “protected” from competition. Well, to a point. However, nothing is stopping large electricity users from building their own wind farms. However, those Commercial businesses, will be taxed at a LOWER rate, on the same equipment and property that Westar wants to build.
Yes, checks and balances are a good thing, and Westar should not expect a “rubber stamp yes” answer to everything they want.
It is very telling, however, to see the reactions on this thread.
Do you really want alternative energy?
Or, do you just hate corporate America — and complain about “green” issues only when what you want hurts corporate America?
An almost entirely ignored EXCESS of energy shines or falls or moves across this planet.
If I was a utilities executive, I’d be quaking in my boots and working on my resume writing.
We could help that out you know.
Let the government even mumble about getting into alternative energy production and the utilities will SCRAMBLE to beat them to it.
Econ:Remember when disc brakes first came out? I worked on them while a hydraulic tech in the air force. The easiest things in the world to work on. Much simpler than regular brakes. My point is, auto shops charged way more to fix the disc brakes than regular brakes. In effect, ripping off consumers.
This is what I’m seeing in the alternate energy industry. Energy corporations want to charge more for something that basically runs itself, as long as wind is present. Upkeep consists of regular maintenance preventative work; something that has to be done on any piece of machinery.
The windmills are built to last in Kansas winds. They’re not paper cutouts. Charging more for energy from them is nothing more than corporate greed, and an attempt by the energy companies to snow the public with hi-tech nonsense. It ain’t rocket science, and it ain’t complicated.
City might get in the wind farm businessNovember 27, 2007 by Toby Van Fleet and Lee van der Voo in The Portland TribuneThe city of Portland could become part owner of a wind farm east of The Dalles if a deal now in the works with Sherman County and the farmers who live there takes hold. Portland officials are pursuing the idea as a means of offsetting the city government’s own energy consumption, which is about 50 megawatts a year. …Commissioner Dan Saltzman, whose office is leading the negotiations, said while green power generally costs more, the plan ideally would enable the city to meet its renewable energy goal without increasing its energy bill. He expects the investment to pay for itself in about 10 years and that the city ultimately could draw revenue from the project.
http://www.windaction.org/news/c98/
Sigh, I’m still not good with links.
Looks like SOME local governments are rattling the saber at the power companies already. And Indian reservations are looking at generating earth friendly power as well!
Westar? Quit looking to milk your customers. Do the right thing because it is profitable and sustainable. We’ll give you a gold star even.
JM – they will require maintainence. They will also require a collection grid. So, I hope the KCC thoroughly examines ALL costs and renders a decision based on eberything.
I want Westar to make a profit on this venture. However, in analyzing Westar’s overall profit structure I would NOT allow the losses from their past gambles OUTSIDE the regulated utility area. Ratepayers should not be expected to pay for Protection One.
How about revoking westar monopoly status and allow other companys to sell energy.
What is their justification for wanting the 1% premium? Other than a 1978 incentive plan?
TomIf you “revoke” any utilities monopoly status, you have a hard time justifying the 30% assessment rate for utility property tax purposes.
This will be a blow to several communities, actually causing a general property tax increase, if utility tax rates are lowered.
Also, you have right of way and easement issues to deal with.
Your looking at a plan the electric lobby bought in l978. 29 years ago. Probably the old REA still has some loop holes in the rate structure if some utility lawyer wants to research. Face it we have all this new wonderfull electric generating sources available. Just stick the consumer he can’t do a darn thing about it. The more the utility spends the more they get on a return on investment. Look at that big fancy office complex in Hays almost as good as the medical center. Bet the furniture and office fixtures didn’t come from Office Max. No particle board desks there. New pickups top of the line models. Paying for legal expenses from former convicted felons. Only in America and especially Kansas. Land of O’s. We have a city electric utility that misfigured the rates for the last year or so and the auditors didn’t catch it so they add the additional lost onto the Consumer. No one is the blame just pass it on. Great Auditors.Hire them for your tax work.
Wittig and Lake raped the utility while saddling it with Protection one Oneok and other non profitable companies. Our legal system has now ruled that the penalty for this crime is that Westar has to pay millions for their defense. Isn’t this like punishing Westar for prosecuting these two crooks?
All that aside maybe there is another way to lessen the impact of the upfront capitalization of the wind farms. Maybe restructure the tax rates to allow for accelerated depreciation to lessen their corporate rate and tax liability. Look at other ways to lesses their load without putting it all on higher rates.
I don’t believe that they deserve an open ended approval to recover all of the cost up front nor should they be able to bilk the consumer for poor business decisions in the past.
Wind is an energy source whose time has come. We need to help it become a reality soon. Rate structure needs to be watched closely. How many years did Wichita pay enormous rates while Topeka didn’t to pay for Wolf Creek?
IF you had more companies you would have more taxes and the government shouldn’t be charging 30% taxes on property taxes anyways. Dont us the utility users pay the high taxes of the ultility company thru our rates now, no monopoly = lower rates thru competition and lower taxes on the company. That’s actually free market capitalism at work.
Don’t worry Sebelius will see that Westar is taken care of.
Ben,
I agree Westar, or anyone in business, deserves a profit. To think otherwise is socialism. However, any machine needs maintenance, both preventative and predictive. That is a cost built into any producing structure. It is not something new, nor is it something corporations are just getting into: it’s as old as manufacturing itself.
So Westar trying to add maintenance as a cost doesn’t wash: it’s already factored in the final drafts. If it is not, it is totally disingenuous to the paying public. I can’t think of any kind of situation where maintenance costs aren’t factored in. Unless Westar decides not to factor it into initial costs, which, in my opinion, would make Westar a pretty stupid entity. Although I have worked at manufacturing plants that essentially disregarded preventative maintenance, and it always jumped up to bite them.
I don’t see this as a right/left political argument; I see it as a public/private responsibility decision. If Westar makes its case for a rate increase based on ALL factors, then they deserve it. If they try to make their case based on public ignorance of wind generation, then read my post on disc brakes.
Westar is only demanding more money because they think they can. That fact is that wind is cheaper than coal, in construction, in buying fuel (that’s free) and in labor. Like GM with the electric car they don’t want wind power to be cheap and profitable because then there will be a higher demand for it. If they can push an unnecessary expense onto the consumer (while raking in more revenue) they will because the consumers will think wind power is more expensive and won’t demand it.
I was involved in a study group almost 2 years ago that addressed rate hikes for Westar. They said that the utility hadn’t raised rates since 1986.Does anybody know if that’s accurate?
I came here hoping for a little knowledge, not finding it so far.
Can anyone come up with a cost of wind power versus coal versus nuclear?
I’m pretty sure that the cost per kwh of power from wind (over the expected lifetime of the equipment) is significantly higher than for coal power plants even with the latest in emissions control.
But I don’t know that for a fact. Anyone have any sources on that?
If that is the case it must be accounted for.
Not sure about that one XXX but I do know they are a publically traded company and stock holders took a bath when Wittig and Lake pulled their shenanigans. Buying the Oklahoma and New Mexico power companies. Investing in real estate. Establishing Protection One as part of KPL which became Westar.
They then attempted to put the debt on the power side and sell off the companies that created the debt and make millions in the trade. This is simplistic explanation of a much more complicated issue.
I think that the rate comment is probably true but it doesn’t take into account that the procurement charge for fuel went up a lot during this time. You can see this on your statement. There is always more than one way to skin a cat.
ksgrm – good idea about depreciation. Perhaps institute something to HR3090 specifically for such assets – an immediate 50% writeoff. Decreases their depreciation write-off in future years but a nice sweetener today.
Also good points about Pro-One etc – the reason I want those costs segregated on their books. Shareholders CHOSE to take thos wild gambles; they would have reaped unregulated profits had the gambles paid off. They and tey alone should bear the costs of those failures; not the rate-payers.
Heckler
“For comparison, the capital cost of a new coal-fired power station is about 80c per watt (that’s without paying for the coal!), and today’s large wind turbines cost a shade below $2 per watt.
Various developing technologies and processes, including improved thin-film technology, promise to bring manufacturing costs below $US1 per watt in the next two years. Installed costs should fall to something like $3 per watt; much cheaper for large installations.
The “best” retail price for panels using the established technologies of crystalline silicon solar cells has been steady around the $US4.70 per watt mark for the last three years; this reflects a short-term spike in the price of refined silicon (solar cells compete for this raw material with higher-value microchips) combined with a fall in the overlaid costs of solar technology.”
These statements are from a blog I have visited before. They are from bloggers just like us but appear to be based on knowledge and some on personal usage.
Heckler – the cost of coal will depend on whether they are required to internalized many costs that are now externalized. The problem with both coal and nuclear is that you have to consider future fuel costs; with wind the ‘fuel’ is free. So, you have a large up-front capital cost (which ksgrm addressed well) but lower ‘down-the-line’ costs.
Ben you and I are in agreement here. I came from Oklahoma 21 years ago and GRDA was in my back yard. If you aren’t famillar with hydro power that is the Grand River Dam Authority. At it’s time this was the largest Corp of Eng. project for hydro power ever built.
We had cheap, renewable, non-poluting power. Then I moved to Kansas. Obviously hydo power isn’t going to happen here on a scale that large but we do have the wind.
This is something R&D should have been spent on long ago. We are now in a crisis situation and everyone is looking for a quick fix.
Actually ksgrm I suspect we do now have enough data on wind to predict costs and performance. That is a lot different from the situation with nuclear when we did Wolf Creek. So, I would think that good financial pro-formas can be done for a wind project.
Blank, Your posts will probably get erased as I’ve noticed mine and others have been when typekey messes up.
If this gets blanked, this is Kansas. :D
“when typekey messes up”
Yeah right. It’s not a Typekey failure. Typekey has signed you out, so you automatically post with the last non-Typekey name you posted with.
Busted.
I have found that to happen to me. Now I just sign on the blog page instead of TypeKey and tell it to remember me. It hasn’t blanked me out yet. If someone wants to change nics this might trip you up. Did notice that I always have to put in the security letters and numbers today.
Ksgrm,
The reason I use Typekey is to keep from having my nic trolled or stolen. It’s not a perfect solution, as someone really clever can still play little impostor games, but it’s better than nothing.
Improving Westar’s management of expenses will do more for their bottom line. It appears to me that if the BOARD OF DIRECTORS would provide proper insight over the operations, the shareholders would be better compensated. Who knows, they might even be able to REDUCE rates if they controlled expenses better!!
I think a point has been missed here.
Westar is asking for that additional 1% profit to generate Wind Power, in accordance with the desire of the State of Kansas to generate power with alternative means.
Alternative to what? To cheaper alternatives, such as coal.
So, the State of Kansas is telling Westar how to run their business in a certain way, and compensating the utility for the higher investment cost of doing so by allowing a whopping 1% addtional profit.
How much more profit would the utility make on coal, which would also save customers on their utility bills?
You want clean energy, somebody has to pay for it.
Somebody, should be all of us who benefit, and not just the utility paying (in terms of lower profits) out of their pocket.
IF you had more companies you would have more taxes and the government shouldn’t be charging 30% taxes on property taxes anyways. Dont us the utility users pay the high taxes of the ultility company thru our rates now, no monopoly = lower rates thru competition and lower taxes on the company. That’s actually free market capitalism at work.
Posted by: Tom Paine | December 09, 2007 at 11:40 AM
How about revoking westar monopoly status and allow other companys to sell energy.
Posted by: Tom Paine | December 09, 2007 at 10:49 AM
Two good points Tom, and you are sounding like a capitalist.
One – some competition would help drive down costs and encourage some creative R & D approaches to developing alternative energy sources.
Two – any taxes on any corporation are ultimately paid by the CUSTOMERS.
Go ahead, raise utility taxes if you think that will lower your own property taxes. You will just pay for it through higher utility bills.
One other thing to factor into the wind power cost.
What happens when the wind doesn’t blow?
Do the lights go out?
Nope. The utilities must maintain DUAL or MULTIPLE backup generation stations, and have these on standby ready to fire-up when the wind calms down.
And with wind speed changing throughout the day and the night, back-ups can be very expense.
Storing wind power – in development, but even storage and reconversion is expensive.
-Pump air undergound and recover the air to generate power when the wind is calm.
-Convert the excess wind power on a windy day to hydrogen, then burn the hydrogen to generate power when the wind is slow.
-Use hydro power storage by pumping water from below a dam back to the reservoir to generate hydro power when the wind calms down.
Wind Power is still a technology in development, and is not the cheapest solution yet.
Max as always there is more to this than meets the eye. I have been spoiled for many years of hydro power from GRDA.
We can’t expect private investors in Westar to absorb the cost of development of wind power. They are the true winners and losers here.
Complex situation.
I agree it is complex ksgrm.
I’m not arguing against alternative energy either. (If anyone has read any of my prveious posts on energy, they would know that.)
I am saying that alternative energy is more expensive then conventional technology, and the CUSTOMERS will pay the price for it.
There is no free lunch.
I’m willing to pay more for clean energy. I am NOT willing to pay more for OTHERS to have clean energy.
The Clinton plan calls for more Socialism – that is – higher taxes to spend on Socialist programs to pay for the energy costs of those who pay little or no taxes today.
It’s easy to argue for alternative energy and cry about Global warming IF you think YOU are not the one who is going to pay for it.
Max that is sad but true. As long as we take from those who have and give to those who have not we won’t get past point A.
Eventually those workers bees that JR doesn’t like will grow tired and stop pedaling. Then this train ride we have been on for these many years will come to a screeching halt. Lets just hope it come to a safe halt and doesn’t completely derail then it will still be fixable.
I’m afraid ksgrm that the train will have to come to a complete stop before everyone realizes that Socialism does not work.
For those who fail to study history, they will be doomed to repeat it.
Worldwide depression will happen again, much worse then before. In the agricultural economy we had in the 1930’s, most people lived on farms and could at least feed themselves. They had the skills to do many different tasks without running to some retailer to do the task for them.
Who can grow their own food today? Who can repair their own cars, tractors, other machinary, furnaces, homes, etc….
In the 2030’s, people will not have the skill set to survive, and life will be much more difficult then it was for those in the depression of the 1930’s.
It’s likely that war will result again, as it usually does when resources get scarce, we wind up with countries fighting countries for what the other does not have.
Not a pretty picture for us in our golden years, or our kids and grandkids.
That’s why we need to do something now to get the train going in the right direction, before we run out of track going in the wrong direction.
And those who are collecting something for nothing, in the back of their minds or in their conscience, know that the gravy train cannot continue forever. They just don’t want to admit it.
A couple dollars a month doesn’t really seem like that much, probably not even to someone on fixed income.
That’s OK with me. If Westar doesn’t want the project, I’m sure there is someone out there who would put the project in for a reasonable profit. Screw Westar. We are still paying for Wolf Creek. Now they got some other white elephant project for us to pay for. Just another Westar con job. It should be OK with you if they don’t want it, let someone else do it. Screw Westar.
I posted a response this morning, but it seems to have disappeared.
If the wind dies down, there are other alternatives like coal power or photovolataic power which can all be used in prallel but connected to the sam electrical grid. The state of Kansas is offereing Westar incentives to convert to renewable energy resources. So, why doesn’t our state offer consumers the same typ of incentives? Let us generate some of our own power and whatever we don’t need we sell back to Westar at the current market rate. Germany is doing this right now as I write this. If Westar doesn’t agree to this, then why not subsidize consumers to go out and buy their own wind generators and solar cells? It will involve high capital costs, but in the long run , we all benefit. Not just the power moguls.
Just saw on the news KC has just cancelled a coal fired plant, even after spending a couple mil. in preparation.
roland – I agree on reverse metering. That would be a great addition to the grid. As for concern ‘when the wind dies down’ that isn’t a problem. It’s always windy somewhere – that is why they build a lot of turbines.
Another approach is something called ‘community wind’ – KState is looking at that application for rural areas. Tie a group together similar to the farmer’s coops to generate power for local communities. I suggested to the KState that they could do it either under a subchapter S or sub-chapter K structure for tax purposes with the local owners sharing in any profits. Almost like a Credit Union for power.
Not sure how the electric grid is linked across the U.S., but looks like there could be some kind of sharing credit.
Ben,Wind farms, such as the one near Beaumont are a good idea, but horribly expensive to build. Rather than invest in lots of wind farms, smaller and cheaper wind turbines could be set up on roofs of most houses and buildings and the power sold to the grid. A small unit could be installed atop every utility pole and several apiece on cell towers etc. Fossil fuel use could be a fraction of the current level, and maybe once such a system expands across the country, eliminated except as an emergency backup.
Does anybody know what percentage of profit Westar is allowed currently?
Jed – I favor ‘all of the above’ – we need lots of approaches.
They could have large turbines at industrial sites as well.
Ben,The primary requirement is for a turbine design that is dependable, cheap and low-maintenence, that is self-contained and easily hooked to the grid, and can be produced in huge numbers. One thing to consider though is how much the energy that would be removed from the wind would affect weather systems. There’s no free lunch or energy!
Ben,
In addition to large industrial sites, turbines could be utilized on college campuses. I know that Carleton College (where the elder matriculated and graduated) has erected one, and is obtaining some percentage of its electricity needs therefrom. The college is also able to sell any excess (I suspect this would primarily be in the summer) to the local electrical utility, as I recall the program.
It seems to me that KU, in particular, would be a good place for a turbine or two, given it sits on top of the “hill”, and from my experience, in the winter, there’s nothing that slows down the North wind from Canada until it arrives in Lawrence. I’m sure that all the Regents’ schools could find a place for one or more of these.
VT – yep. And maybe even at KU! Although after they get deflated in the VT game it might not work!
(Sorry ’bout that – the devil made me do it!)