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Ruling: No extra profit for Westar with wind

Whether Kansans will get electricity from wind power was up in the air late Thursday after state regulators ruled that Westar Energy won’t be able to make an extra profit for developing wind farms.

The Kansas Corporation Commission rejected a key part of a proposal by Westar that would have added 1 percent to the company’s rate of return for developing wind energy.

Westar has said that it wanted the premium to compensate for the increased risk of developing wind power compared to fuels such as coal and natural gas.

Thursday evening, Westar wasn’t saying whether it would go ahead with wind power.

“We can’t say yet,” said company spokesman Nick Bundy. He said Westar executives are discussing their options and will probably issue a statement today.

Adding 300 megawatts of wind power – enough to power 90,000 homes – is projected to cost $830 million over the next 20 years.

Westar estimated its plan would initially raise the average customer’s bill by $2.25 a month. Updated estimates were not available after Thursday’s decision.

Westar chief executive Bill Moore testified in a commission hearing Dec. 3 that the company would scrap its wind plan if regulators did not grant the profit request.

But in their written order Thursday, commissioners noted that the extra return for Westar would have cost ratepayers $47 million over the next 20 years.

“The commission notes it has granted Westar the ownership (of wind farms) it seeks, which provides Westar’s shareholders with an almost 11 percent rate of return,” the commission order said. “Furthermore, Westar’s risk in this venture is effectively mitigated by the commission’s other decisions in this predetermination docket.”

Other ruling issues

In addition to the profit component, Westar is concerned with a part of the commission decision that would subject it to ongoing review to ensure that the wind turbines are operated efficiently, Bundy said.

The review regimen the commission approved falls short of what its staff had recommended.

The commission staff had proposed a sharing arrangement in which Westar would get additional profit if wind plants exceeded production projections, while customers would get money back if wind production was less than expected.

The case was decided by two of the three commission members – chairman Thomas Wright and commissioner Michael Moffet.

Commissioner James Harkins recused himself, saying it had come too soon after he left a job advising Gov. Kathleen Sebelius on energy policy. Sebelius appointed him to the commission in July.

Establishing large-scale wind power is one of Sebelius’ primary policy objectives.

In her State of the State speech in January, she set a goal of Kansas getting 10 percent of its energy from wind by 2010 and 20 percent by 2020.

The commission did give Westar much of what it asked for, including authorization to own its own wind power plants and the right to charge customers $282 million to build wind farms next year, plus future operating expenses.

Sources of wind energy

The company wants to generate about half the wind power it would provide to customers and buy the other half from independent wind-power developers.

The Citizens’ Utility Ratepayer Board, the state agency that represents residential and small-business customers, argued that Westar should buy all its wind power from the developers.

CURB officials said that would reduce the risk if production falls short of projections.

Although CURB lost on that point, its chief consumer counsel, David Springe, was delighted that commissioners didn’t grant Westar any extra return.

“I’m real pleased with the way the order came out,” Springe said. “We were very opposed to giving Westar extra money just for doing it.

“We didn’t get everything we want, but I think it’s a balanced and reasonable decision.”

Businesses take note

The decision could also help big business customers, said James Zakoura, a lawyer representing Kansas Industrial Consumers, a group including Cessna Aircraft Co., Hawker Beechcraft Corp. and the Goodyear Tire and Rubber Co.

Industrial users supported – and the commission approved –a so-called “green tariff” that would allow individuals or businesses to specifically buy wind energy.

The federal government is expected to eventually pass a “carbon tax” in an effort to reduce global-warming emissions. Being able to buy wind power directly from the source could help offset tax liability and give Kansas businesses a competitive edge, Zakoura said.

Although they each opposed aspects of Westar’s plans during the hearing process, both Springe and Zakoura said they hope the company decides to go forward with wind power.

“I would hope they would do so for the good of the state and the good of the nation,” Zakoura said.

“I know they said in the hearings that they wouldn’t do it,” Springe added. “I hope they do… for their customers who want it and their shareholders, who will benefit from it.”

By Dion Lefler

The Wichita Eagle

28 December 2007