|
|
|
| 2009 Rate Consolidation Proposal |
|
Westar Rate Consolidation - What does it mean for you?
Public Hearings regarding Rate Consolidation Proposal
What is rate consolidation?
Westar Energy has asked the Kansas Corporation Commission (KCC) to consider consolidating the rates charged to Westar North and Westar South customers. This means that customers in both territories would ultimately pay the same rate for the same type of service.
Why are the rates different?
In 1992, Kansas Power and Light Company (KPL) merged with Kansas Gas and Electric Company (KGE) to form Westar Energy. The former KPL service area including Topeka and the surrounding area is referred to as Westar North. The former KGE service area including Wichita and the surrounding area is referred to as Westar South.
The difference in cost for electricity between the two territories results from:
- Different structures used by KPL and KGE to determine costs.
- Different market conditions the two companies faced during their more than 80 years of service.
- Different strategies the companies employed to provide service to their respective customers.
For example when Wolf Creek was built in 1985, KGE owned 47 percent of the nuclear plant. As a result, customers in Westar South have historically paid higher rates to cover the significant cost of the initial capital investment but lower fuel costs.
Alternatively, in 1978 KPL invested in Jeffrey Energy Center, a coal fired power plant. Capital costs for coal plants are lower than for nuclear plants, but the cost of fuel is higher.
The generating facilities of Westar North and Westar South are now used on a combined basis to meet the needs of all Westar’s customers. Operating the system in this manner benefits all customers because it results in greater efficiencies and lower costs.
What is Westar’s Rate Consolidation Proposal?
Since the merger between KPL and KGE 18 years ago, Westar has been working to achieve rate parity.
The first phase of the rate consolidation proposed by Westar is to calculate a single retail energy cost adjustment, transmission delivery charge, property tax surcharge, and environmental cost recovery rider for all customers.
- Retail Energy Cost Adjustment: Encompasses the fuel costs to produce electricity, purchased power cost, and the off-system sales adjustment, which credits profits from wholesale sales to retail customers.
- Transmission Delivery Charge: Reflects costs associated with building and maintaining Westar Energy's transmission system.
- Property Tax Surcharge: Reflects changes in the amount of property tax since Westar Energy’s most recent rate review.
- Environmental Cost Recovery Rider: Allows Westar to recoup the costs associated with investing in equipment to meet environmental standards.
In phase II of Westar's proposal, an effort will be made to eliminate any remaining differences in the base rates between the North and the South.
Will my bill be higher if rates are consolidated?
Currently the average Westar North residential customer pays $77.28 a month and the average Westar South residential customer pays $77.31 a month. Although the rates are very similar, different costs structures make up the total amount. If the rates are not consolidated, they could diverge in the future.
If the Commission agrees to adopt Westar's proposal, the first phase of the rate consolidation will not affect customer's rates. Any increase or decrease to the retail energy cost adjustment, transmission delivery charge, property tax surcharge, and environmental cost recovery rider will be offset by an equal and opposite change to the base rates to assure the process is neutral for Westar and its customers.
For example, if the fuel charge for Westar South has averaged 1.4 cents per kWh, and the Westar North average fuel charge was 2.0 cents per kWh, the consolidated fuel charge would be 1.7 cents per kWh. Westar’s proposal would raise the Westar North customers’ base energy rate by 0.3 cents per KWh and lower the Westar South base energy rates by 0.3 cents per kWh.
If rate consolidation is adopted, further adjustments will be made during phase II to equalize rates between Westar North customers and Westar South customers, so that all Westar customers will pay the same rate for the same service.
What is the role of the Kansas Corporation Commission?
It has been the position of the Commission staff that any attempt to equalize rates among merged utility customers should be done gradually to avoid unreasonable rate impacts for any one group of customers.
Following the merger of Kansas Power and Light and Kansas Gas and Electric in 1992, the Commission urged Westar Energy to reduce the disparity between Westar North and Westar South rates during a 1996 rate case and again in 2001 and 2005.
In 2008, Westar initiated a proceeding to make changes to its charges for electric service. Westar proposed to further advance convergence of Westar North and South rates, stating that the rates between Westar North and Westar South were very close, and that now might be an appropriate time to consolidate the rates.
The Commission made the decision to address the issue of consolidation in a separate docket to allow interested parties to present testimony and to encourage public input that focuses on the sole question of rate consolidation and the resulting rate design.
In this proceeding, the Kansas Corporation Commission will consider if the rates should be consolidated and, if so, how the rates should be consolidated to be sure all Westar customers pay the same rate for the same service. Your comments at the public hearing are an important part of this process!
Kansas Corporation Commission (KCC)
1500 SW Arrowhead Road, Topeka, KS 66604-4027
785.271.3140
http://kcc.ks.gov
|
|
|
|