State utility regulators heard opening arguments Monday on Westar Energy’s bid to raise rates to cover investment in new wind energy for its electric generation system.
The Kansas Corporation Commission planned to continue today with a three-day hearing on the rate case and expects to issue a decision by the end of the month.
If approved, average residential customers would see an increase of about $2.25 per month on their bills.
Just two of the three KCC members, Michael Moffet and Chairman Tom Wright, presided at the hearing. Third member Joe Harkins had recused himself from the proceeding citing a conflict because he had worked for Gov. Kathleen Sebelius on wind energy issues before she recently appointed him to the commission.
The state’s consumer advocacy office had asked the other two Sebelius-appointed commissioners to also recuse, citing a memo from Westar executives that said the governor had assured the company could recover its costs in wind energy investments. Wright and Moffet, however, declined to step down, saying in a filing last week they never had discussed wind energy rates with the governor.
Westar is seeking the rate approval to recover $282 million for ownership of turbines at two proposed wind farms and for costs in purchasing energy from a third farm. The 300 megawatts of electricity would come from the Central Plains Wind Farm in Wichita County; Meridian Way Wind Farm in Cloud County and Flat Ridge Wind Farm in Barber County.
Westar Chief Executive Officer Bill Moore testified the company sought a split approach to investing in wind energy. Over time, he said, they’ll determine whether it’s more cost effective to own the farms or just to purchase the power from them.
David Springe, attorney for the state’s consumer advocacy office, told the board this would be a precedent-setting case.
“What you do here is going to set the template.”
Westar, the state’s largest electric company, aims to have turbines running at the sites by late 2008 so they can qualify for a 10-year federal production tax credit for wind facilities.
“In addition to the societal and environmental benefits associated with wind energy, the use of wind energy – which has no fuel cost – will allow Westar to displace other fuel costs associated with coal or natural gas generation,” the company wrote in its brief.
The company plans to announce a second round of wind farm investments for 200 more megawatts of production starting in 2010.
Commissioner Moffet noted Westar planned to ask for further rate hikes in coming years. The company plans to make new investments in its system of more than $2 billion, which includes the wind power as well as other energy system investments.
“Do you expect Westar will be able to continue to offer below-average rates assuming these investments are approved and brought online?” Moffet asked.
“I assume we’ll maintain that relative position,” Moore replied.
Westar expects energy demand to continue growing among customers. And while new wind energy can put off purchase of new “baseload” or constant power sources, for now, the utility expects it will need to build a new power plant between 2016 and 2018.
Moore said the company might consider building an Integrated Gasification Combined Cycle plant.
Such facilities, now rare in the United State because of cost, produce synthetic gas from high-sulfur coal, petroleum residues or biomass.
“We’re not putting our eggs in one basket,” Moore said of power sources. “And we’re leaving room for an exit ramp in case new technology surfaces in coming years.”
Utility costs are expected to rise for all energy companies as uncertainty in the marketplace increases and Congress considers legislation to reduce carbon emissions.
Moore told commissioners Westar would walk away from the wind projects if they weren’t allowed to earn at least a small profit from them.
Springe said that’s a concern.
“Our board supports wind, but we’d like it to be acquired in the least costly manner,” Springe said.
“We also don’t believe that the utility shareholders should be given a prize in terms of excess consumer dollars simply for putting wind on the system,” he said. “If wind is the right thing to do, they should do it and we should not have to pay extra money to them for that purpose.”
By Sarah Kessinger
Harris News Service
4 December 2007
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