2011 Rate Review
4-18-2012 | KCC Approves $50 Million Increase in Westar Energy Rate Application
Below we address some of the most common questions about our rate filing. If you have a question that is not answered or you would like to schedule a Westar representative to speak with your community group, please email us.
Review Westar’s full application for a price increase:
Rate Review Table of Contents
Volume 1
Volume 2
Volume 3
Volume 4
If you experience issues opening the above files, please email us.
Why is Westar asking for a rate increase?
As a regulated utility, we are only allowed to charge prices equal to the actual cost of providing your electric service. Those operating costs have gone up since we last adjusted our prices, including higher costs for copper and steel, gasoline for our trucks, and other operating expenses. When our costs and our prices are out of balance, either the utility or regulators can request an adjustment to bring them into balance. We are also asking the commission to allow us funds for an enhanced tree trimming program that will reduce outages and to recover increases in general operating expenses, including higher operating costs for new reliability and EPA regulations.
How much will rates go up?
For a typical household, the increase will be about $6.50 per month or 21 cents per day. Across our entire system for our nearly 700,000 customers, the request ends up being $91 million, which is, on average, a 5.85% increase to prices.
Westar’s electricity is a good value. Even with the increase, it cost only about $1 a week to run your refrigerator. That is less than the bottle of water or soda inside. This summer high temperatures had air conditioners humming. Even as temperatures soared, most customers were able to keep their homes comfortable for about $3 to $5 per day; that’s less than a fast food combo meal or a latte. (This assumes a home of about 1,400 square foot with central air that is about 10 years old or newer.)
How do Westar's rates compare?
Our rates are significantly below the national average and below those of all other major utilities in the region. After the increase we expect they will remain 15 percent below the national average and still lower than others in the region.
When will the change in prices take effect?
The Kansas Corporation Commission has eight months to audit and consider our request, which means we expect any price adjustment to occur about May of next year.
What can I do to avoid higher electric bills, given that Westar’s prices are going up?
Our efficiency experts have developed programs and tips to help you. From low-cost gadgets to deciding if it is time to invest in a new higher efficiency heating and cooling system, they provide tools and advice to help you better manage your energy use and get the most value from your energy dollar. To learn about some of the programs we offer, check out the information our experts and efficiency engineers have put together for you at www.WestarEnergy.com/efficiency.
What does Westar do to control its costs?
We are constantly looking for ways to be more efficient so that we can offset the many outside cost pressures facing us. As an example, just implementing some of the suggestions our employees have offered up has saved $12 million. Most of our employees are also our customers who pay the same prices you do, so they understand and have incentive to help keep electric prices affordable. Our power marketing team looks for opportunities to sell any extra electricity we can produce and uses the profits from those sales to reduce your retail prices. Predictive maintenance practices on our plants and lines helps us gain maximum value of our equipment.
Mandated projects: Many of our projects – especially environmental projects and renewable generation – are driven by government mandates. In those cases, we first work to educate policy makers about the impact new regulations will have on electricity costs. We think it is important that they realize the full impact of new rules. Once the requirements of the project are known, we look at various options for meeting the mandate and select the best solutions with lowest-cost being of utmost consideration.
Reliability projects and system improvements: When projects are proposed we carefully weigh the cost and benefit, looking closely at the effect on our prices and our reliability. Many pieces of our system will reliably serve our customers for decades if properly maintained. We strive to make sure customers are gaining maximum value from our plants, wires and other assets, as maintaining them, while costly, is less expensive than replacing them.
Why can't investors just accept a lower return?
We are fortunate that we have investors who understand what our Kansas customers really need from us, and they, as we do, take a long-term view. In fact, nearly 20,000 of our shareholders are your Kansas friends and neighbors—maybe even you. But all smart investors naturally weigh risk and return when choosing whom to entrust with their hard earned savings that they’ve tucked away for retirement or their child’s education. They have thousands of choices where they can invest. We have to keep Westar a sound investment if we expect investors to buy our stock and bonds so that we have the money to build and maintain power plants and lines. If Westar can’t offer them a fair deal, they’ll invest their dollars elsewhere, and that would put our Kansas infrastructure at risk and put your community at an economic disadvantage. We can’t let that happen.
What role does Westar play in Kansas' economic development?
It’s important that we keep our service reliable and our prices affordable. Of course, there is naturally a trade off among these two important things, and it’s our job, with the oversight of the KCC, to make sure they stay in balance.
Our reliable, affordable electricity has been an important factor in Kansas recently to attract new employers like Mars Chocolate in Topeka and Siemens Wind Turbines in Hutchinson, and expansions to facilities in Wichita, to name just a couple of examples. In the case of each one of these, reliability was just as important to them, if not more so, than prices.
Is the increase related to the recent arbitration settlements reached with former executives?
No. As we have said, and as Kansas regulators have assured, none of the costs related to those settlements, including legal fees, has been or ever will be paid for by our customers. We’re relieved to have that sad chapter behind us after almost 10 years.
With the hot weather this summer and many people having high electric bills, why is a price increase still needed?
In balancing costs and prices, regulators know that weather evens out over time. For example, hot weather this summer helped even out the coldest summer in four decades just a couple of years ago.
Regardless of recent temperatures, however, costs associated with producing and delivering electricity are rising. To maintain a reliable electric infrastructure we need to keep our prices and costs in balance. We certainly can’t plan on hot weather.
TREE TRIMMING AND VEGETATION MANAGEMENT
You name the ReliabiliTree as an expense in the rate increase. What is this program?
It’s about more reliability for less cost. ReliabiliTree improves electric service by addressing a leading cause of outages – trees in and around power lines. ReliabiliTree crews trim trees on a regular cycle. They work methodically through areas and are followed by line crews that identify and fix any equipment issues to prevent future problems. This proactive program is more efficient because crews aren’t moving about chasing problem areas. Also, it benefits customers because the work is proactive and the clear area around power lines is maintained instead of Westar responding to blinks and outages.
Storms in Wichita and northeast Kansas left some customers without power for days in August. Would ReliabiliTree have prevented that?
ReliabiliTree cannot prevent all outages, but it certainly would have reduced the number and severity. Where we have already tested the program we have seen tree-related outages reduced by nearly 70 percent compared with the past two years. When a wind storm brought 90 mph gusts through Wichita in August, customers where ReliabiliTree crews had been through saw about half as many tree-related outages as other areas of the city. Here are some results from more typical recent storms:
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| April 15 | Up to 49 mph | 9 | 35 |
| April 29 | Up to 50 mph | 4 | 37 |
| Memorial Day | Up to 43 mph | 3 | 25 |
Is ReliabiliTree only tree trimming?
No, it’s much more comprehensive than that. As part of ReliabiliTree, we also help raise awareness about the importance of planting the right tree in the right place and in some cases participate in community tree-replacement programs. The right tree in the right place means ensuring that the full height and reach of a tree and how it may encroach upon power lines is considered before it is planted. It is also having linemen conduct preventive maintenance on the lines as trees and branches are cleared.
Full information about ReliabiliTree is available at www.WestarEnergy.com/tree.
BENEFITS
Why is Westar requesting higher rates to cover employee benefit costs?
Proper pension funding is required by federal law. Pension costs not many years ago served to actually decrease customers’ rates. However, even after we have reformed our pension costs years ago — like many others are just now starting to do — the values and volatility in the stock market left the Westar pension (like many others) requiring more to meet federal funding limits. Just as we keep our commitments to our customers, it’s important to keep commitments to those who run our power plants and keep our lines clear.
A significant portion of the rate requests is related to employee benefits. How do Westar benefits compare?
The cost of our retirement and benefits packages are slightly below average when we compare ourselves to other small and mid-size utilities. It is important that we offer comparable wages and benefits in order to retain highly skilled employees and provide safe, reliable service.