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Posted on Dec. 13, 2006
By STEVE EVERLY
The Kansas City Star
KCP&L Plant Costs Escalating
As a result, customers' electric rates also could go higher than had been expected.
Kansas City Power & Light's part of a new power plant and pollution control retrofitting will cost 20 percent more than expected and could climb more.
Great Plains Energy Inc., the parent of KCP&L, said in a regulatory filing that it now estimated its costs would be $1.5 billion to $1.6 billion to complete its energy plan because of higher costs for the coal-fired Iatan 2 power plant near Weston and environmental upgrades for its LaCygne power plant.
The upper range of the new estimate, which is 28 percent higher than the old estimate, includes contingency funds to cover additional increases if they should occur. Besides the Iatan plant and the pollution controls, the plan includes a wind-power facility and energy conservation efforts.
Electric rates, as a result of the higher costs, may end up going higher than expected as well. KCP&L originally said rates could increase by 20 percent over five years to cover its energy plan.
The new estimate is up sharply from one made in 2005 that expected KCP&L's part of the plan to be $1.27 billion. The company said increases in the cost of labor, equipment and materials were behind most of the increase. The cost of the environmental retrofits has been especially high because many other utilities are also undertaking such projects.
A company spokesman said Tuesday that the new figures reflected their current "overall expectations."
"We think it is a good estimate," said Mike Deggendorf, vice president of public affairs.
Great Plains, however, gave no assurance that estimates would not eventually go higher, stating in a document filed late Monday with the Securities and Exchange Commission that "the actual expenditures, scope and timing of any or all of these projects that have not been completed may differ materially from these estimates."
Two relatively small parts of the energy plan, the wind-energy farm and conservation programs, have not seen increases in their costs. The wind farm began operation in September.
Construction of the 850-megawatt, coal-fired plant near Weston - which has already begun and is scheduled to be completed in 2010 - had been estimated at $733 million for the utility. KCP&L will own 55 percent of the plant, with Aquila Inc., Empire District Electric Co. and municipal utilities in Missouri and Kansas owning the rest. The new estimate of KCP&L's portion of the plant costs is $837 million to $914 million.
KCP&L's estimates for its cost to retrofit the LaCygne power plant have climbed 56 percent and, when the contingency cushion is included, are up 63 percent. The estimate, which had been $272 million, is now $423 million to $443 million.
Electric bills for KCP&L's Kansas residential customers are already set to go up an average of 9 percent starting Jan. 1, under a rate increase approved recently. For the utility, the increase will raise rates $29 million a year and raise revenue 7.4 percent.
KCP&L is required to file one more rate case in Kansas in conjunction with its overall energy plan, with the option to file additional rate requests through 2010.
A request to raise rates in Missouri by 11.5 percent, which would raise an average residential bill about $7 a month, could be ruled on by state regulators as early as next week. KCP&L is also expected to file additional rate cases in Missouri as part of its regulatory plan approved for the projects.
Deggendorf said Tuesday the company was reviewing how the estimate on rate increases might be affected by increased costs, but the company expects rates will still be about 20 percent under the national average.
David Springe, head of the Citizens' Utility Ratepayer Board in Topeka, said it is pretty clear the original estimate of rate increases will change. He said it would be hard to stop those increases from flowing through to the utility's customers because of the terms of the regulatory plan, which he did not sign. In the end, he said, KCP&L's customers will probably be on the hook for the higher costs.
"Consumers are at risk," he said.
Great Plains shares closed Tuesday at $31.97, up 18 cents.
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