Kansas can forget about wind power if Westar Energy doesn’t get the chance to earn extra profit from it, the company’s chief executive testified Monday.
Westar chief executive Bill Moore also said Westar would scrap its wind energy plans if the company isn’t allowed to build its own wind plants, or if regulators approve sanctions that would be triggered if wind power performs below expectations.
“If the direction we’re headed is not what the commission wants us to do, we won’t go forward,” Moore said.
Monday was day one of a court-like hearing on how Westar will recover costs of adding about 300 megawatts of wind power to its energy system, which serves 674,000 Kansas customers.
The project is expected to cost about $830 million over the next 20 years, and to raise the average customer’s rates by about $2.25 a month in its early years.
Westar is the largest of several utilities that met with Gov. Kathleen Sebelius and Lt. Gov. Mark Parkinson in December 2006 – just before Sebelius called on Kansas to tap wind for 10 percent of the state’s power by 2010 and 20 percent by 2020.
According to a once-confidential e-mail memo from former Westar chief executive James Haines, the company agreed to go along with Sebelius’ wind-power goals based on the governor’s promise that Westar would be “fully compensated” for its costs.
On Monday, Moore testified Westar would severely curtail or stop developing wind power if the Kansas Corporation Commission – which sets electric rates – doesn’t give the company an extra return on wind for its stockholders.
State consumer-protection officials estimate the extra profit margin Westar is proposing could cost ratepayers about $50 million over the next 20 years.
State law allows the KCC to grant extra profit potential to utilities that invest in alternative energy and conservation programs.
Westar’s adversaries indicated in their opening statements that they plan to fight hard to eliminate or at least cut down Westar’s proposed extra profit potential.
“They should not have to be bribed to do wind,” said David Springe, consumer counsel for the Citizens’ Utility Ratepayer Board, the state agency that represents residential and small-business customers.
Under questioning by KCC staff attorney Dana Bradbury and James Zakoura, a lawyer representing industrial customers, Moore said his company could not accept a smaller profit margin than it has requested.
“My answer was ‘no,’ the reason being, I would not want to set a precedent” for future cases on conservation programs, he said.
Two other factors emerged at Monday’s hearing as potential deal breakers for Westar’s first foray into large-scale wind energy.
The first is a proposal by the KCC staff to create an incentive program that would reward Westar if wind outperforms expectations, or penalize the company if it comes up short.
Moore said that would be unacceptable because it would put the company in a position where it could lose money simply because the weather didn’t cooperate.
Bradbury said the proposal is fair because it already takes into account the potential vagaries of the wind and would simply create an incentive for Westar to maintain its wind turbines.
The other proposal Moore said would kill wind power was put forth by CURB.
While CURB supports wind, it wants Westar to buy all its wind power from wind-farm developers rather than have the company own and operate its own wind plants.
Moore said Westar is not interested in that because there’s no potential profit for stockholders if Westar just buys wind energy and resells it at cost to customers.
He said Westar disagrees with CURB’s analysis that purchased power would necessarily be cheaper than Westar could generate from the three wind farms it proposes to build.
Westar suggests instead a 50-50 split – generating half the wind power on its own and contracting for the other half.
Moore said that would reduce risk for the company and consumers and allow Westar to find out whether it’s cheaper to buy wind power or generate it itself.
The hearing will continue at 9 a.m. today with more testimony from Westar officials.
Witnesses for CURB and the KCC staff are scheduled to testify later today.
The commission is expected to issue a decision in the case by the end of the month, officials said.
By Dion Lefler
4 December 2007
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