Many of Americas power companies have put their profits before the health of our citizens and the protection of the environment. The American Lung Association estimates that the EPAs proposed guidelines for particulates could prevent 38,000 heart attacks and premature deaths, 1.5 million cases of acute bronchitis and aggravated asthma, and 2.7 million days of missed work or school. Yet, there are many coal burning power plants in the US which operate without scrubbers to remove particulates, because coal is cheap and scrubbers are expensive.
Scientists have known since 1980 that our increasing CO2 levels were endangering our environment. All the worlds major scientific organizations are now saying that we must take immediate action to avoid environmental disasters. There is really no effective way to remove carbon emissions from fossil fuel plants,yetour power companies have fought a shift to renewable energy. Many power companies are now being required to install costly upgradesto their coal-fired plants, and are trying to recoup the cost of their short-term thinking by raising their customers rates. Westar energy is a good example, and it is likely that your electric company may soon follow suit.
Westar Energy has requested a rate increase by $152 million a year, about 8% over its current rates. The increase was requested toupgrade its Wolf Creek nuclear plant,to install scrubbers at some of itscoal-fired power plants, and to remove mercury from itsLa Cyngecoal-fired power plant. Westars proposed rate design would shift more of its costs from businesses to residential customers and increase the basic charge for residential service by $3 a month each year for the next five years. That means the cost to just keep the power on would increase from the current $12 a month to $27 a month. Customers who want to install their own solar or wind power would be required to pay a $50 customer chargeor pay for power at the peak rate, effectively killing private investments in solar energy. Westars customers are understandably unhappy about this.
CEO pay and profits : As a Westar stockholder, I felt bad about the recent rate hearing in Wichita. Speaker after speaker, including several ministers and AARP representatives, testified about how the proposed increase in rates would affect the poor and elderly. The timing of the rate increase seems inappropriate. Morningstar reported that last year the companys top five executives received 23.5% in salary increases. Westars CEO now receives $3 million in compensation, more than 30 times that of our governor. A large portion of the compensation is in stock, which tends to encourage short-term decisions to increase stock value.
Many people also testified that the proposed rate structure would discourage private investments in energy efficiency, energy conservation, and solar panels. A poll by Magellan found that 76% of Westars customers oppose the tariff on solar panels, agreeing that Westars position was based on increasing its profit. Westar is also requesting a 10% return on investments which seems high for a company which has just invested several million dollars in executive raises.
A misleading process: Although Westar says it is committed to renewable energy and reduced carbon emissions, their proposal would havejust the opposite effect. There are number of red flags for investors evident in the rate proposal and in Westars actions over the last several years. Many investors are now looking for long-term investments in environmentally and socially responsible companies. Westar may no longer fall into that category. AARP ran a full-page ad in the local newspaper protesting the rate increase. About 73% of Westar stock is held by institutional investors and many of thoseare retirement funds. Ifsome of those retirement funds decide to divestof Westars stock, the effect will certainly not be what the CEO intended.
There wasalso concern about the integrity of the process, which was unnecessarily secretive and sometimes misleading. A local newspaper article pointed out that, Westars public notice fails to detail changes in billing, solar rates. And, the CEOs letter to stockholders claimed that outside agitators were responsible for opposition to the solar fee which was not what the Magellan study found.Hisidea that solarcustomerswere free riders who didnt pay their fair sharecame from an ALEC meeting in Chicago. Chicago? It was propaganda createdbypower companies worried about solar cutting into their market share. His letter claimed that solar customers who hooked to the grid using net metering agreements were being subsidized by other ratepayers, though research has found just the opposite. I would expect such a well-paid CEO to know about the research.
Solar Research: Studies in Vermont, New York, California, Texas, and Nevada concluded that net metering provided a net positive benefit for utility companies and their customers. A 2015 study done in Missouri is even more relevant to Kansas. A cost-benefit study of net metering in Missouri arrived at the same conclusion as the other studies, Net metering provides a net benefit. Missouri has 6000 net metering customers while Westar now has approximately 300. It is unlikely that a study done in Kansas would come up with a different result, but the Westar executives claim differently.
Why should customers who cut theirenergy use in half by installing solar panels be charged an extra fee, whilethose who cut theiruse in half byinstalling extra insulation be considered differently? Westar claims they should be, but that seems unreasonable. Net metering customers are charged a fee to set up the system and for a safety inspection, but otherwise net energy metering customers should be treated just as any other customer when they use electricity and be reimbursed as any other supplier when they supply excess power. Charging solar customers an extra feemay actually cause an increase inelectric rate s.
Gaming the system: My son, who worked for a gas company, observed that in gas company rate cases they always asked for about twice what they wanted and settled for half of that. Other than the money to have Wolf Creek comply with federal regulations, much of the other requests are unjustified. Residential customers are already paying a customer fee, an electricity fee, a fuel charge, a distribution fee, an environmental fee, an energy efficiency charge, and even Westars property taxes. Last June, our bill was $24.95 for electricity, but our total bill came out to be $53.27 after all those things were added in. The $12 customer charge is already greater than most other companies charge and Westars rates are second highest in our region. Westar has implied that residential customers are not paying their fair share of the cost. However, residential customers use about a third of the energy, but it seems they are being asked to pick up much more than a third of the cost of upgrades and pollution controls.
Westar owes a better accounting ofthe money it collects. There have been over 20 rate cases in the last six years. Too much time and resourceshave beendevoted to rate casesdesigned to increase the companys profits. The executive compensation seems excessive and much of it is in stock, which means a rise in profits will greatly benefit the executives. That tends to lead to short-term thinking, which is evident in this rate proposal. It does not take into account the increasing future regulations of carbon emissions and the need to reduce dependence on coal-fired power plants.
Settlement? Just before the rate case was to go to the Kansas Corporation Commission, Westar cut its rate request in half. My son said, See there. Westar alsoasked to postponeits requestfor a tariff on solarpanelsto a laterhearing. Westarisnowproposing a reduction in the subscription fee for wind energy customers, buildingits ownsolar plant, and selling solar power to customers. That is a big improvement, but Westar is still relying too heavily on its coal-fired power plants. Three of its smaller plants have no scrubbers and they should be phased out as soon as possible. Earlier, $600 million was budgeted for upgrading the LaCynge plant. Im not sure how much of thathas already been spent , but pouring more money into itto remove mercury may be a bad investment. It is expensive to remove mercury, but it is impossible to remove carbon emissions.
The Supreme Court, in Massachusetts v. EPA , ordered the EPA to make a determination as to whether carbon dioxide is a pollutant. The EPA found, based on the best scientific evidence, that CO2 is an endangerment to public health and has moved forward with regulations to reduce the carbon emissions from power plants. There will be future environmental regulations which will be costly to the coal plants. Why waste million of dollars in emission control equipment and spend millions importing coal from Wyoming when we could be transitioning to Kansas-based renewableenergy?
The future : The Kansas Corporation Commission should approve upgrading the Wolf Creek plant, butcarefully consider the amount of money requested. Moving forward with plans to provide customers with wind and solar energy subscriptions is in the right direction and should be encouraged. Other than that, there are better options for Kansas. The Kansas Corporation Commissionshouldsend the rest of Westars plan back to the drawing board.
(C) 2015 Que