Westar Energy still plans to pursue three wind-power projects, but says an order from state regulators curtailing its potential profits will prevent it from investing in additional wind farms.
Westar had hoped regulators would allow it to earn higher profits because of its investment in 295 megawatts of generating capacity from wind farms in three counties. That’s enough to power about 88,000 homes.
The Kansas Corporation Commission said Thursday that the Topeka-based utility would be allowed to recover up to $282 million in construction costs through its rates.
But the commission refused an additional 1 percent increase in the profits Westar can earn from wind energy.
Westar had said it would pursue projects for an additional 200 megawatts of wind-generated capacity. But Bill Moore, the utility’s president and chief executive, said Friday that those plans are on hold indefinitely.
“We are concerned about the uncertainty introduced by the commission’s decision,” Moore said in a written statement. “We don’t see the order encouraging the future development of wind energy in Kansas.”
Westar had estimated that its proposal would have increased residential customers’ bills between $2 and $2.50 a month on average. The commission’s order trims those figures by 10 cents, the company said Friday.
But Kansas Corporation Commission spokeswoman Rosemary Foreman said the regulatory agency doesn’t think its order should discourage the development of wind power. She said parts of the order Westar dislikes are efforts by the commission to ensure proper oversight.
“It truly is a way to actually just allow the company to move forward with their proposal while assuring, through a review in a couple of years, that the project is continuing as proposed and in the best public interest,” she said.
Consumer advocates had said Westar’s shareholders would have collected an additional $50 million in profits over 20 years under the company’s proposal.
“On balance, we think it’s a good and reasonable decision,” said David Springe, chief attorney for the Citizens’ Utility Ratepayer Board, a state agency that represents residential customers and small businesses.
Westar spokeswoman Gina Penzig said the company sought the higher return because of an increased financial risk associated with investing in renewable resources. State law allows utilities to seek an additional return of up to 2 percent for such investments.
Wind’s inconsistency and construction costs make electricity from wind turbines more expensive per kilowatt hour in the short term than power from coal-fired plants.
But Foreman said Westar shareholders’ risk was lessened because regulators will permit the utility to recover its investments in wind farms through its rates.
“The commission just didn’t think it justified the ratepayers paying an additional cost,” she said. “The risk to the company is minimized.”
The company also was troubled by the commission’s discussion of a proposal that could have led to financial penalties if the wind farms didn’t operate efficiently enough. The commission said it would give Westar “the benefit of the doubt” and not impose such a plan, but it also didn’t rule out the idea for the future.
Moore said the language suggested that the commission may impose harsher operating standards for wind than other types of generating plants.
Foreman said the commission has a duty to see that generating plants operate efficiently.
Westar’s announcement came as Gov. Kathleen Sebelius is promoting renewable energy, particularly wind power. In May, she and utility executives announced a goal to have wind and other renewable resources account for 10 percent of the state’s generating capacity by 2010 and 20 percent by 2020.
Sebelius said in a statement that she’s encouraged Westar will go ahead with development of its existing projects.
“While there is more work to be done, this marks an important first step for the KCC in establishing a regulatory framework for wind energy,” she said.
29 December 2007