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Kansas Regulators Approve Power Plant and Rate Increases to Fund It

Posted on: Friday, 5 August 2005, 21:00 CDT

Aug. 6--Kansas utility regulators on Friday approved Kansas City Power & Light's proposed coal-fired power plant near Weston and rate increases of up to 20 percent to fund it.

The nod by the Kansas Corporation Commission comes a week after Missouri utility regulators approved the five-year, $1.2 billion project, giving it the green light to proceed.

Besides the power plant, the project includes energy conservation projects, at least one wind farm and some retrofits to reduce pollution at existing plants.

"We've had a long, collaborative process, and I think we achieved the broad-based support throughout the community that we sought," said KCP&L spokesman Tom Robinson.

The plan approved by Kansas regulators calls for KCP&L to:

-- Build, along with so-far unnamed partners, a 800- to 900-megawatt coal-fired plant near the existing Iatan 1 plant near Weston. KCP&L will own 500 megawatts of Iatan 2, and its share of the cost will come to $734 million. Construction is expected to begin in late 2007 and be completed by June 2010.

-- Build 100 megawatts of wind-power generation at a cost of $130 million by the end of 2006 and add up to 100 more megawatts by the end of 2010.

-- Provide environmental upgrades at Iatan 1 and KCP&L's La Cygne 1 plant at a cost of $271 million. The upgrades are to be completed by 2010.

-- Build additional transmission and distribution facilities at a cost of $42 million.

-- Develop programs to help customers manage their electricity use. The programs are expected to cost $42.3 million.

-- File a rate case by Feb. 1, 2006, with the possibility of filing additional rate increases over the five years of the plan.

The Kansas Corporation Commission estimated that the rate increase needed to fund the project would total between 15 percent and 20 percent, or 3 percent to 4 percent annually over the project's five-year period.

KCP&L must file a request with the commission before it can increase rates. Customers will be notified of such increases and will have a chance to comment on them first.

"Any rate increases would be tied to specific investments as they came in service," Robinson said.

KCP&L will also be allowed to seek so-called energy cost adjustments on customer bills. The adjustments are designed to let the company recover its costs of fuel and purchased power. The commission said the utility would not earn a profit on those costs.

In addition, if approved by the commission, KCP&L will be allowed to collect so-called contributions in aid of construction from customers.

Commission spokeswoman Rosemary Foreman said that the contributions, which would be in addition to any rate increases, would enable KCP&L to generate sufficient cash flow to maintain an investment grade credit rating. That, in turn, would reduce its financing costs for the project, she said.

The Sierra Club and Concerned Citizens of Platte County oppose the project, largely on environmental grounds. In a statement Friday, the Kansas chapter of the Sierra Club criticized the commission's decision as paying insufficient attention to wind power, leaving Kansas ratepayers at the mercy of rising coal prices and subjecting future generations to an additional 6 million tons per year of greenhouse gasses.

Charles Benjamin, an attorney for the Kansas chapter of the Sierra Club, also questioned the energy cost adjustments, which he said "appeared to be illegal on the Missouri side."

"So they're only proposing this on the Kansas side," he said. "There's an interesting question here about whether this kind of mechanism is legal."

Benjamin said both the Missouri and Kansas chapters of the Sierra Club were considering a joint challenge in court against the project.

Robinson responded that the orders of both Kansas and Missouri regulators had determined that all the components of the project were legal.

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Copyright (c) 2005, The Kansas City Star, Mo.

Distributed by Knight Ridder/Tribune Business News.

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KLT,

Source: The Kansas City Star (Kansas City, Missouri)

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