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Posted on Thu, Dec. 06, 2007
By STEVE EVERLY
The Kansas City Star
Hearings on Sale of Aquila Suspended as E-mail Controversy Grows
Great Plains Energy’s bid to get Missouri’s approval to buy Aquila was in such disarray Thursday that it asked that hearings on the deal be suspended while it regroups.
The utilities said late Thursday that they would work with other parties, including those representing consumers, to draw up a new proposal to present to the MissouriPublic Service Commission in January.
The move capped a hectic day that saw Missouri’s top utility regulator recuse himself from the case after the state’s attorney general said he should not be part of deciding the matter.
Also Thursday, public counsel Lewis Mills, who represents consumers in utility cases, said he would file a motion over the weekend to have the case dismissed.
The uproar has at least delayed approval of Great Plains’ $1.7 billion purchase of Aquila, under which it would keep Aquila’s 300,000 electric customers in Missouri and send Aquila’s other utilities to a South Dakota energy company, Black Hills.
Mills started the controversy this week when he disclosed that the commission chairman, Jeff Davis, and three of the four other commissioners had met privately with utility officials in January, before the proposed sale was announced.
Though such briefings aren’t unusual, e-mails about the meetings written by Richard Green, Aquila’s chief executive, were released that raised further questions.
In one e-mail, Green wrote that Davis had said in January that he was willing to get the transaction approved quickly.
Davis maintained that he instead had told Green that the case would be decided on the facts presented and that he wouldn’t prejudge the case. In a statement Thursday, Davis continued to say he had done nothing wrong but would recuse himself from the case.
“The public needs to have absolute confidence in the process, and to the extent this matter has become a distraction from reaching a fair decision in the case at hand, the distraction needs to be removed, and I need to take myself out of the equation,” he said.
The commission’s proceedings continued Thursday after his recusal because the remaining members still constituted a quorum. The recusal by Davis, however, is unlikely to end the controversy, and Aquila and Great Plains face a protracted dispute that could doom the acquisition.
Mills said he would still file the motion for dismissal despite the utilities’ offer to remake the regulatory plan, since the private meetings were still a pertinent issue.
“From our perspective, there is no way to get a fair hearing,” Mills said.
In addition, there are no guarantees that Great Plains and Aquila will come back with anything substantially different from what they have already offered.
The utilities’ current plan was facing mounting opposition. It was opposed by the Public Service Commission’s staff, the Missouri Office of the Public Counsel, which Mills heads, and several industrial users.
The plan would cost Aquila customers up to an additional $80 million annually over five years. Among other things, it would force Aquila customers to pay for higher interest costs caused by Aquila’s failed forays into unregulated businesses.
Great Plains had originally been expected to have a fairly easy time gaining approval for the acquisition because regulators and others were thought to be eager to be rid of Aquila. But Great Plains appears to have overplayed its hand.
Stu Conrad, who represents the industrial users, referred to Great Plains as the “golden child” and Aquila as “Chucky,” the protagonist in the horror film “Child’s Play.”
But that wasn’t enough to justify putting so much of the costs on the “back of ratepayers,” he said.
Earlier in the day, Attorney General Jay Nixon had sent a letter to Mills saying that Davis and other commissioners who had improper communications with the two companies should recuse themselves from the case.
Separately, the Consumer Council of Missouri also called for Davis to recuse himself. Alberta Slavin, head of the group and a former commissioner, said the move was necessary for the commission to maintain “a certain degree of integrity.”
The controversy was also spreading to Kansas. Green’s e-mails discussed meetings with Kansas regulators, who also must approve the transaction. One e-mail said the sale would get regulatory support from the state.
David Springe, head of Kansas’ Citizens’ Utility Ratepayer Board, said Thursday that he would request the e-mails that discuss the meetings with Kansas regulators.
Such private meetings, he said, “don’t look good.”
The meetings themselves aren’t illegal, but consumer groups and other parties involved in regulatory cases have long wondered what was being said at the meetings and whether they went beyond simply providing information. The e-mails, released this week, appear to confirm those concerns.
Mike Chesser, chief executive of Great Plains, didn’t write any e-mails that were released, but his testimony this week suggested a cozy relationship with regulators.
Chesser said in testimony this week that the utilities were looking for feedback in the private meetings with regulators, not wanting to propose something that would run into heavy opposition.
“We didn’t hear anything significantly negative,” he testified.
Aquila shares closed Thursday at $3.97, down 1 cent. Great Plains closed at $30.32, up 15 cents.
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