Kansas regulators have rejected Westar Energy Inc.'s request to recover from ratepayers costs tied to its acquisition of an 8% interest in the state's largest coal-fired power plant, the Jeffrey Energy Center.
The Kansas Corporation Commission said in a Sept. 12 order that the company did not prove that the move was a "prudent decision for its retail customers." A Westar representative said Sept. 13 that the company was reviewing the order to determine its next steps.
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 nonfuel 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 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.
Consumer groups did not support the cost recovery request, but commission staff did.
The commission, however, said Westar entered into the settlement agreement with Midwest Power knowing, among other things, it did not need the 8% portion of the power plant to satisfy its capacity requirements. Westar was also aware of the economic risks of operating the 8% interest and that the portion was not likely to become profitable, the commission said. The company further knew the costs tied to the settlement agreement would increase customers' retail rates, regulators said.
"Based on these facts in existence at the time Westar committed itself to the costs of the settlement agreement with [Midwest Power], the commission finds Westar's decision showed a lack of prudence necessary to compel customers to bear the costs associated therewith," the commission said.
While denying the cost recovery request, regulators said Westar is "allowed to retain any wholesale sales that are directly attributable to the 8% portion of JEC for which the commission has denied Westar recovery of the incurred cost of owning or leasing and operating the 8% portion of JEC." (Kansas Corporation Commission Docket No. 19-WSEE-355-TAR)