Consumers Get Ready to Boost KCP&L's Profit Margin (a lot!)

by Allen Williams

Consumers prepare to substantially improve the KCP&L bottom line with the latest rate hike pending before the Kansas Corporation Commission.

KCP&L RATE Increase

Kansas City Power and Light has filed a request with the Kansas Corporation Commission to increase its Kansas retail rates by approximately $673 million.  If approved, rates will increase by 12.5% in October 2015.

KCPL's proposal

The company claims that the "average utility customer using 1467 kwh in the summer and 791kwh in the winter will see an average increase of $11.67/month."  The company claims that the rate increase is due to increased regulatory compliance requirements for Wolf Creek, environmental upgrades and infrastructure improvements. This is a permanent rate hike for limited improvements. Details of the KCP&L proposal may be accessed here - page 1 and here - page 2.  A complete copy of the proposal is available on the Commission's website at www.kc..ks.gov
 

KCP&L wants 67.3 million in expanded Kansas retail sales for improvements in mandated environmental upgrades according to their customer letter, Improvements to Wolf Creek Nuclear plant and infrastructure upgrades which includes the Smart Grid spy program.

What is the Impact of a 67.3 million increase on Kansas utility customers?

The rate increase must be born by all ratepayers on the Utility's Kansas side and we see that the KCP&L base would have to take in the entire state to get close to the rate increase numbers claimed by the company. Dividing the rate increase by the state population gives:

$67,300,000 / 2,904,021 = $23.07 (Correction 6/11/15) upawhich is still twice the cost claimed by KCP&L based on Kansas population figures at quickfacts.census.gov. This calculation gives an idea of the enormity of the proposed increase.  KCP&L's website at https://www.kcpl.com/about-kcpl/company-overview/service-area doesn't list a customer base beyond 800,000 for both Missourei and eastern Kansas. However, we may assume for calculational purposes that the 800,000 figure is for Kansas alone and add another 200,000 customers to the KCP&L number to account for new users not listed as well as growth, etc.

Census Bureau Info from quickfacts.census.gov indicates that there are 237,040 firms in Kansas, which are assumed for these computations to pay commercial electric rates.  So, assuming that all Kansas business owners live in Kansas as well, then equal sharing of the burden would be:

$67,300,000 / 1,237,040 Kansas customers = $54.40 each. Again,  this is an average many times greater than what KCP&L has claimed. This infers that the economic burden will be very unequally distributed. We need to look a bit further to get a better conceptual picture. Let's assume that fully 75% of all Kansas residential ratepayers incur a monthly increase of $40.00. Then:

75%*1,000,000*$40.00/month-inc  +  25%*1,000,000 *$11.67 monthly-inc
= $30,000,000 + $2,917,500
=$32,917,500

Therefore, the remaining $34.38 million dollar shortfall must be made up by Kansas Business: ($67,300,000 -$32,917,500) / 237,040 businesses = $145.05 per month per business. So we see that the bulk of Kansas ratepayers will experience far more than an $11.67 rate increase. And, even with a $40 increase per residential customer there is still a huge impact on local business. Now, it's not anticipated that each business will experience the calculated average increase as the greater burden is born by residential users, however, it will be enough to impact economic growth in the state.

KCP&L claims of an average of $11.67 per month per residential user is not only meaningless, it's disingenuous. It can readily be seen that most people must lie outside the 1467 kwh in the summer and 791kwh in the winter in order to achieve the revenue enhancement target, otherwise just a few residents and businesses would experience staggering increases. What KCP&L really means is that out of their band of users that fall into this select kwh usage range, the median or mean amounts to an $11.67 increase. This statement is purposefully intended to tell the user nothing so political opposition is minimized.

KCP&L's statistical increase in no way conveys the out-of-pocket expenses the consumer is going to experience under the proposed rate structure as the above calculations demonstrate.  These costs are going to be passed on to Kansas consumers in the form of higher prices for goods and services purchased in the state. It will be a huge burden on everyone living on a fixed income in the KCP&L district.

KCP&L ratepayers already fund a monthly surcharge on their bills, designated as 'ECA', 'EER', etc by the utility. The ECA charge allows KCPL to recover construction costs for the environmental improvements granted by the KCC under the Utility's 2006 expansion plan. These may essentially be increased at will. But, it appears that ECA/EER surcharges are not only not going to disappear but likely will continue to grow even after KCP&L improvements are completed. Given the extraneous cost adders why does KCPL need a 12+% base rate increase? How much of the $67.3 million goes to subsidize SMART technology that spies on its users?  The SMART grid is an elaborate customer data collection system that can pass consumer data on to third parties presumably for a fee. 

Kansans are further facing potential state and local tax increases because of the state's budgetary woes. Residents cannot afford more money for Great Plains Energy and it's KCP&L subsidiary.

Further Questions to consider:

The latest KCP&L rate request is pending while the US is currently experiencing a -0.2% inflation rate according to usinflationcalculator.com for the second straight month. Why is KCP&L being considered for a 12.5 - 12.9 % rate increase when banks like JP Morgan Chase are paying negative interest rates?

How can such a large utility rate increase be considered in a no-growth economy?

How much new revenue will a bankrupt state of Kansas garner by the KCC approving this increase?

How much additional stimulus money did KCP&L receive over the original $24 million 2009 Stimulus grant?

Why are ratepayers being asked to pay for KCP&L sustainable development?
 

Tke Kansas Corporation Commission will accept written comments through June 16, 2015. If you'd like to voice your concerns, contact the Kansas Corporation Commission, citing Docket No: 15-KCPE-116-RTS at::

Kansas Corporation Commission
Office of Public Affairs
1500 SW Arrowhead Road
Topeka, KS  66604
Phone:  1-800-662-0027
Email: public.affairs@kcc.ks.org