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Posted on Fri, Mar. 2, 2007
By STEVE EVERLY
The Kansas City Star
KCP&L: Ruling Won't Jar Plan
Energy projects will go on, but court leaves questions over pact.
"To say that (rate) decision was wholly independent of the regulatory plan is ludicrous. Let's just tear it up and then we'll find out if it matters."
Lawyer Stuart Conrad
Kansas City Power & Light said Thursday that a court ruling this week would have no effect on completing its energy plan, including a coal-fired power plant near Weston.
The Missouri Court of Appeals on Tuesday reversed the Missouri Public Service Commission's approval of the plan, saying the regulators had not followed state law in the way they handled the case.
KCP&L said it was reviewing its options, which could include doing nothing or asking the court to reconsider its ruling.
The court opinion raised questions about the energy plan, with some opponents asserting that there was a new chance to stop the Iatan 2 plant near Weston.
But KCP&L officials rejected that argument and said Thursday that they did not expect the court ruling to have an impact on the projects within the plan, including the construction of the 850-megawatt power plant.
"We're moving forward," said Bill Downey, president of KCP&L.
At the center of the dispute is a settlement among several parties, including KCP&L and the Missouri Office of the Public Counsel, which represents customers in utility matters. The parties agreed that the plan, including the power plant, a wind farm, environmental retrofits and energy efficiency projects, was needed to meet the area's coming power needs.
In addition, the settlement offered KCP&L some assurances that it would be able to pay for the plan without affecting its investment-grade credit rating.
The deal also sketched out a series of rate cases through 2010 to pay for it. One rate case to pay for the wind farm was recently approved by state regulators, and another to pay for some of the environmental retrofits on existing plants is pending.
KCP&L's estimate of the cost of the overall plan was increased late last year from $1.3 billion to as much as $1.6 billion, and utility officials have said rates could increase by as much as 25 percent by 2010 to pay for it.
A lawsuit filed by the Sierra Club and the Concerned Citizens of Platte County objected to the way regulators said the energy plan was needed and how it would be paid for. The utility initially filed a case with the commission in which "workshops" were held to present KCP&L's and the public's views over how best to meet future electricity demand in the area. During this phase, talks for a settlement began.
KCP&L then filed a "contested" case with state regulators - which is what a utility normally does when seeking a rate increase. Under that process, those for and against the increase present their cases to the commission and public hearings are held.
But instead of the contested case moving forward in its usual fashion, KCP&L immediately filed the proposed settlement. Public hearings were held, but just on the settlement, which the commission subsequently approved.
KCP&L officials acknowledge the decision has sowed some confusion about the energy plan. But they claim the commission was not a party to the settlement and was not bound by it. Subsequent decisions to raise rates to pay for the plan, as a result, are independent.
But that logic puzzles others who were involved in the regulatory proceeding.
Stuart Conrad, an area lawyer who represented an industrial electric user who approved the settlement, said that such agreements among parties are highly influential with regulators, and that the commission often referred to the settlement in its recent approval of an increase in KCP&L rates.
"To say that (rate) decision was wholly independent of the regulatory plan is ludicrous," he said. "Let's just tear it up and then we'll find out if it matters."
John Coffman, who represented the AARP in the KCP&L rate case and is former head of the Office of the Public Counsel, said there are now serious questions about those recently raised rates, some of which go to pay for the energy plan.
"This is creating real legal uncertainty," he said.
Jeff Davis, commission chairman, said the influence of such settlements was a fair argument. But at the same time, he said, the commission was not a party to such an agreement and was not bound by it, so it is able to act independently of it.
"It was more like a joint position of those parties that were offering it," he said.
In a separate development, KCP&L on Thursday filed with Kansas regulators to raise rates in the state. The proposed $47.1 million rate increase would raise an average residential customer’s electric bill by $9.11 per month.
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