Proposal: End cost studies for some rate increases

11/23/2013

Proposal: End cost studies for some rate increases

Proposal: End cost studies for some rate increases

TOPEKA (AP) — The chairman of the Kansas Corporation Commission has suggested that regulators end the practice of conducting cost studies for proposed rate increases that are less than 10 percent.

KCC chairman Mark Sievers made the proposal in a statement responding to Westar Energy's recent $30.7 million rate request, which also was approved Thursday.

Sievers suggested that the commission could presume rate increases of less than 10 percent are reasonable. He said that would save time and the expense of cost allocation and rate design studies. Cost studies have typically run about $75,000 to complete.

"Cost allocation is an imprecise art and not a science — littered with details, and there are times when it is not fruitful to engage in the work effort to do a full-blown cost allocation or rate design study," Sievers wrote.

The Topeka Capital-Journal reports cost allocation was an issue in Westar's latest case because the utility sought larger increases for residential and small commercial customers. The Citizens' Utility Ratepayer Board argued residents should pay less of the increase. The utility and CURB used different formulas.

to reach their conclusions.

Sievers supported the Westar settlement on condition that the way the rate increase was determined doesn't become the model for rate cases. His point is that the process has no guarantee that customers are paying the correct rates.

"Based on my review of the evidence in the record, I think it is a 'leap of faith' to conclude that the results in the settlement reflect relevant economic costs," he said.

Sievers' statement wasn't included as part of the official Westar case record.

Commissioner Thomas Wright read his own statement raising concerns that Sievers' comments could undermine KCC decisions. Wright said making sure rates were fair was a judgment call.

"We can't possibly know every detail of every customer so our rate designs will always be approximations," he said. "When we take an oath to become commissioners, the oath obligates us to be fair and reasonable — not formula-driven robots."

Commissioner Shari Feist Albrecht, also objected to putting Sievers' statement in the record, but said it could be helpful in an upcoming case on how to deal with rate increase requests in the future.

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