Kansas City Power & Light is rejecting calls for more scrutiny of its decision to defer development of a wind farm this year.
The utility recently said it would not build the 100-megawatt wind farm this year because of difficulties in obtaining financing stemming from the ripple effects of the subprime mortgage meltdown. The utility did say it would evaluate whether the wind farm should be built in 2009.
The decision surprised many who had expected the wind farm to be built this year. The wind farm would have been the second one owned by KCP&L, which is owned by Great Plains Energy Inc.
Some parties, including the Missouri Public Service Commission’s staff and the Missouri Office of the Public Counsel, said more information about the decision was needed and regulators should consider whether the utility was justified in tabling the wind farm. They contend such a process was established as part of a settlement allowing, among other things, a coal-fired power plant to be built near Weston.
But KCP&L, in a filing late Monday with the commission, said the second wind farm was not part of that plan. The company said its only obligation was to consult with the other parties, including the commission’s staff, before making a decision.
“Although KCP&L’s commitment under the regulatory plan … includes completion or substantial progress being made toward the construction projects in the resource plan, the 2008 wind facility is not part of that plan,” according to the utility’s filing.
Wess Henderson, executive director of the commission, and Lewis Mills, head of the Office of the Public Counsel, said they disagreed with that view and would continue to push for more scrutiny of KCP&L decision.
Although the KCP&L filing did not provide all of the information requested, it did provide some details that the company said led to its decision not to build the wind farm this year.
The wind farm decision came as the utility grappled with mounting cost pressures for the coal-fired Iatan 2 power plant it is building near Weston. The company plans to release a revised cost estimate for the new plant in the second quarter.
KCP&L, in its regulatory filing, said building the wind farm this year would have posed an “unacceptable risk” for the company and its customers. This year already was projected to be the peak year in terms of the company’s financing requirements for its overall energy plan, including for the coal power plant.
The company contends that tapping its short-term liquidity, such as a credit line, to build the wind farm would hamper the company’s ability to address unforeseen events, such as ice storms.
“Neither KCP&L nor any other utility should consider the desirability of a project without taking into account the costs and risk associated with financing the project,” the company said in its regulatory filing.
KCP&L also rejected suggestions that it consider a purchased power agreement, under which a third party would own the wind facility and the utility would agree to purchase the power. Although such arrangements often are seen as less expensive for consumers, KCP&L contends it would be more expensive. Notably, a purchased power agreement would be treated as debt on the company’s balance sheet and would “adversely” affect the company.
The company still has a separate agreement with the Sierra Club to build 100 megawatts of wind energy by the end of 2010, and an additional 300 megawatts by 2012. The company has said it will stand by that agreement.
While that may be the case, KCP&L didn’t sound enthusiastic about wind energy in its regulatory filing, saying that it has an obligation to provide safe and adequate service at just and reasonable rates.
“It is difficult to justify an intermittent relatively expensive generation resource, such as wind, under this model,” the company said.
By Steve Everly
4 March 2008
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