Kansas regulators are soon scheduled to rule on a request by Westar Energy Inc. to recover from ratepayers roughly $8 million in costs tied to its acquisition of an 8% interest in the state's largest coal-fired power plant, the Jeffrey Energy Center.
Westar Energy and Kansas Gas and Electric Co., known together as Westar, in early August took over the 8% ownership in the 2,181-MW plant that had been held by a trust controlled by Midwest Power Co., a subsidiary of Ohio-headquartered bank holding company KeyCorp.
Prior to that, Westar and fellow Evergy Inc. subsidiary KCP&L Greater Missouri Operations Co. together owned 92% of the Jeffrey Energy Center. The 8% interest had been leased to Westar and its predecessor companies since 1991.
Westar sold the output from the 8% interest to Mid-Kansas Electric Co. LLC under a power purchase agreement. The power purchase agreement and lease both expired Jan. 3.
Leading up to the lease's end, Midwest Power said it would not continue to pay costs tied to its share of capital and non-fuel operations and maintenance expenses. Instead of trying to resolve the matter through a lengthy and costly litigation process, Westar determined that buying Midwest Power's share was the better course to take.
Under a deal reached between the two, Westar agreed to extend the lease until Aug. 4 and then buy Midwest Power's stake in the Jeffrey Energy Center for $3.7 million.
The utility in March asked the Kansas Corporation Commission for permission to recover from customers $4.83 million in deferred lease payments and an estimated $3.2 million in deferred nonfuel operations and maintenance costs stemming from the seven-month lease extension period. Westar also asked to recover ongoing nonfuel operations and maintenance costs associated with the 8% interest it bought.
If approved by the commission, Westar would begin collecting the costs through its Retail Electric Cost Adjustment tariff in the fourth quarter. The commission said it would make a decision by Sept. 12.
Westar's request to recover the deferred expenses would cost a residential customer about $1.66 a month, spokeswoman Gina Penzig said. Ongoing recovery through the Retail Electric Cost Adjustment would be about 30 cents per month. But the costs would be offset by the opportunity to use the power produced to offset other power purchases or sell it when favorable, she said.
The $3.7 million spent to buy Midwest Power's interest in the plant would be considered in Westar's next general rate case. A moratorium is in place for base rates until late 2023, and as that time nears, the company will evaluate need and timing of a request to adjust base rates, Penzig said.
Commission staff supports the cost recovery request, finding that customers will benefit from Westar's expanded ownership.
Consumer groups question purchase
But the Citizens' Utility Ratepayer Board, an advocate for residential and small commercial utility ratepayers, and the Kansas Industrial Consumers Group Inc., have separately called on regulators to reject the request. From CURB's perspective, Westar has not made a compelling case as to why customers should pay for the costs. The Kansas Industrial Consumers Group, meanwhile, has called the purchase a "proposal to bailout utility shareholders at ratepayers' expense."
Westar, however, said acquisition of Midwest Power's interest in the power plant would provide the company and its customers with access to 174 MW of additional capacity and the associated energy at a reasonable price. The three-unit Jeffrey plant in Potawatomie County, Kan., first began operating in 1978. All of its coal supply this year has come from bankrupt Blackjewel LLC's Eagle Butte mine in Campbell County, Wyo.
Penzig said customers have received more than $50 million in benefits from the lease agreement that led to the purchase. If the lease had not been extended and the purchase made, Westar would have been responsible for maintaining the entire plant, not just the 92% already owned by the Evergy companies, and the ability to use or sell energy produced by the 8% would have been lost. (Kansas Corporation Commission Docket No. 19-WSEE-355-TAR)