KCP&L wins 11.7% rate increase for its Kansas City customers

For Kansas City customers, the news shouldn’t come as a shock: Kansas City Power & Light has won approval to raise their electricity rates again.

But the increase in Missouri, the sixth in less than nine years, will still sting, costing the average household nearly $12 more each month. It will help the utility recover costs for pollution control at its La Cygne coal-fired plant, improvements at its Wolf Creek nuclear power plant and rising transmission expenses.

Dustin Allison of the Missouri Office of Public Counsel, which represents consumers in utility cases, said, “Missouri’s middle class is being squeezed, and this doesn’t help.”

The Public Service Commission, which ruled Wednesday, gave KCP&L about three-fourths of what it asked for: an 11.7 percent rate increase, versus a 15.8 percent request, and $89.7 million in added revenue, instead of the $120.9 million requested. The utility’s $9 monthly flat charge per customer also will be allowed to rise to $11.88 instead of the $25 KCP&L requested.

Overall, the utility will be allowed a 9.5 percent rate of return, down from its current 9.7 percent and substantially less than the 10.3 percent rate it requested.

Chuck Caisley, KCP&L’s vice president for marketing and public affairs, said that rate of return was “at the low end of the average nationally. … We would’ve liked those who invest in us in Missouri to get more in return.”

The rate increase covers the 270,000 KCP&L customers in the utility’s original service area, which includes most of Kansas City, Mo. Rates are set separately for its other customers in the state, about 315,000 in western Missouri, including those in St. Joseph and in some area suburbs such as Raytown.

The increase, effective Sept. 15, will be the sixth since the beginning of 2007. Compounded, the increases mean those customers’ rates will be up more than 75 percent in that time, Allison said. But he called the commission’s reduction in KCP&L’s rate of return “a step in the right direction.”

Caisley said the utility viewed the ruling as “constructive overall” and recognizing that KCP&L had made substantial investments to remove “the vast majority” of several pollutants from the La Cygne plant, upgrade Wolf Creek to last another 20 years and improve the utility’s infrastructure and long-term security.

In Kansas, a KCP&L request for a 12.5 percent rate increase is before the Kansas Corporation Commission, which could rule next week. It covers similar costs, including the La Cygne pollution control, but was lower because those customers had already started paying for those costs.

Caisley noted that regulators also approved a fuel-adjustment provision similar to one KCP&L already has for its other Missouri service area, which it acquired when Aquila went out of business.

That clause will let KCP&L periodically pass along changes in its costs for fuels and for wholesale power it buys. That lets the utility recover most of those costs more quickly, instead of having to build them into its next rate increase request.

That also usually means an increase in customers’ bills, but with coal prices down and natural gas prices still relatively low, the charge recently decreased for KCP&L’s former Aquila customers. KCP&L also has a similar charge in Kansas.

The Office of Public Counsel and two groups representing commercial and industrial users had objected to allowing the fuel charge. Letting the costs pass through to customers can be a disincentive for the utility to watch those costs more carefully, Allison said, instead of making them be justified in a rate case. And the periodic changes can make it more difficult for users of large amounts of electricity to budget their expenses.

Allison said his office and those user groups were weighing what to do concerning the fuel adjustment clause. They could ask the PSC for a rehearing on the issue and then go to court if that request either wasn’t granted or a rehearing didn’t produce a favorable result.

Caisley noted that nearly all states with similar regulatory systems allowed fuel adjustments, and this KCP&L service area was the last large one in Missouri to get a fuel adjustment clause.

This story was originally published September 3, 2015 at 7:20 AM with the headline "KCP&L wins 11.7% rate increase for its Kansas City customers."