Cap-and-trade Could Cost Northern Kansans More

Unless changes are made, a proposed cap-and-trade system would mean coal-dependent northern Kansas utility customers would face higher rate increases than their nuclear-power using neighbors to the south.

The systems proposed in Congress would force utilities to reduce their emissions or pay extra for pollution credits.

For years, southern Kansas customers paid more for electricity because of the expense of building Wolf Creek nuclear plant at Burlington, the baseload power plant for Westar South. But the gap has closed as the debt for the nuclear plant was paid down and restructured and the cost of coal rose.

Currently, customers of Topeka-based Westar Energy Inc., the state's largest electric utility, pay nearly identical rates.

Westar wants to equalize the rates before they diverge again; the Kansas Corporation Commission will consider the issue.

Analysts say that if the rates aren't equalized, Westar Energy customers in the northern part of the state would face rate increases that are twice as high as their southern cousins.

But that has generated frustration among some southern customers, including the Wichita school district, which has intervened in the case. The district argues that rate parity now would be unfair to Westar South customers.

"South rate area customers are just beginning to realize the benefits of paying for one half of the investment costs in Wolf Creek," according to an analysis by James Daniel of GDS Associates, who testified for the district. "The north rate area customers would begin to receive the Wolf Creek low fuel cost benefits, yet they have not paid one dollar towards the high investment costs."

The different rates have their roots in the 1992 merger of Kansas Power & Light with Kansas Gas & Electric to form the company now known as Westar. The rates for Westar's Northern and Southern divisions are divided along the old KPL and KGE boundaries.

Westar and the commission staff argue that they have worked hard to reduce southern bills over the years and that Westar is one company operationally.

"They are dispatched as one system of generators, decisions about transmission treat the two areas as one system, and capacity expansion planning treats both service areas as one service area," said Robert Glass, chief of economic policy and planning for the commission. "This has been true since the merger of KPL and KG&E became effective."

The main reason that northern customers would pay more is because the Jeffrey Energy Center near St. Marys, Westar North's main plant, emits about 16 million tons of carbon dioxide a year, while Wolf Creek emits none.

Analysts for the Citizens' Utility Ratepayer Board and Kansas Industrial Consumers estimated that about two-thirds of the cost of cap-and-trade would fall on Westar North.

Normally, the two consumer groups are allies, but in this case, CURB favors rate consolidation and the industrial group opposes it.

Former Wichita Mayor Bob Knight, who crusaded for rate parity in the early 2000s, said it's amusing to hear the same arguments he made then now being used by Westar and the commission staff, which rejected them in the past.

"And the world turns," he said, chuckling. "Now it's kind of a novel concept, this idea that the energy doesn't know where it's coming from or where it's going."