The state of Kansas’s advocate for utility customers said that in the April 18 order approving a stipulation agreement that increases Westar Energy’s base rates by $50 million the Kansas Corporation Commission improperly made no reference to the repeated concerns the advocate’s office had raised about elements of the rate hike.
The KCC “completely dismissed our concerns,” David Springe, general counsel at the Citizens Utility Review Board, said in an interview after the commission’s decision approving the stipulation Westar had reached with the KCC’s staff and all of the other intervenors in the case except CURB.
“We raised some very legitimate issues about the appropriate level of profit,” or rate of return on equity, in Westar’s rates, said Springe, noting that the stipulation authorizes the Topeka-based utility to earn a 10% ROE.
CURB had argued that an ROE of only 8.85% would be more appropriate, given the very low cost of capital and the hard times faced by many of of Westar’s residential and business customers. That and other changes urged by CURB would have resulted in a rate reduction of $11.6 million.
Westar last August file an application for a base rate increase of $90.8 million, with a proposed ROE of 10.6%. The utility said that the hike was needed to enable Westar to recover the costs associated with complying with tightening federal environmental rules, increasing it vegetation management efforts, and funding its pension program, among other things.
CURB said in several flings and at a February hearing that its recommended 8.85% ROE was based upon the results of Discounted Cash Flow and Capital Asset Pricing modeling. It noted that the KCC staff and other participants in the rate case also urged an ROE of less than 10%, although staff later agreed to the stipulation and its 10% ROE.
Springe said that rather than refute or challenge elements of CURB’s arguments in the case, the KCC “simply paid no attention” to the advocate’s filings. “I’m enough of a purist to believe that the commission has an obligation to provide at least some explanation” for why it rejected CURB’s views on an appropriate ROE, he said.
All the commission did in its order, Springe said, was state that all intervenors were given an opportunity to present evidence, and that a substantial amount of evidence was presented. “There was no real analysis.”
He also expressed frustration that only 1,200 of Westar’s nearly 700,000 customers filed comments in the case, despite the fact that, with several other increases in recent years, residential customers this year will be paying rates 23% to 40% higher than they were in 2008. More increases are on the way, he said.
CURB’s general counsel said that the advocate will ask the KCC to reconsider its order and, at least, provide a detailed rebuttal to CURB’s argument. If that fails, he said, CURB may appeal the case to the Kansas Court of Appeals.
-Housley Carr