Kansas City Power & Light (KCP&L, Kansas City, Missouri, U.S.), a subsidiary of Great Plains Energy, has filed an agreement recommending the approval and implementation of a long-term energy plan with the Kansas Corporation Commission (KCC). The comprehensive plan contained in the agreement is designed to meet the growing demand by Kansas customers for additional electricity while delivering significant economic and environmental benefits to the Kansas City area.
The parties to the proceedings who support the agreement include the KCC Staff, Sprint and the Kansas Hospital Association. The KCC is expected to hold hearings prior to its ruling on the agreement. KCP&L, which provides service to approximately 500,000 customers in eastern Kansas and western Missouri, previously filed a substantially similar agreement with the Missouri Public Service Commission on March 28.
“Today’s filing is another important step in our regional strategy to provide reliable, clean, low-cost electricity while protecting the customer from the high cost and volatility of natural gas-based generation,” said KCP&L President & CEO William Downey.
Key benefits of the agreements filed with the Kansas and Missouri commissions include:
- A long-term plan for affordable electricity — avoiding increased reliance on high-cost, volatile fuels for generation by adding 500 MW of new high-efficiency coal-powered generation located in Missouri and 100 MW of wind-powered generation in Kansas, with the potential to add an additional 100 MW of wind capacity at a future date.
- Investment in the local economy — adding jobs in the region. During the four years it will take to build the new coal plant, up to 1000 jobs will be created at the peak of the construction activity, plus 50 to 100 permanent positions once the plant is finished. That translates into approximately $300 million in direct payroll over the four-year period for the Kansas City region, as well as significant tax revenues.
- Improved air quality in the Kansas City area — taking a leadership role in keeping the Kansas City area’s air clean by investing approximately $280 million in technologies to substantially reduce certain air emissions at existing power plants. The plan would ensure KCP&L meets or exceeds existing and anticipated federal air quality standards. The environmental initiatives outlined in the agreement also are included in A Clean Air Action Plan For the Kansas City Region developed by the Mid-America Regional Council, which is leading the effort to reduce ground-level ozone-forming emissions in the Kansas City metropolitan area. The first plant slated for emission control equipment under the plan is Unit #1 at La Cygne, Kansas.
- Top tier reliability — constructing, replacing and/or upgrading existing transmission and distribution facilities to accommodate new generation, and incorporating new technologies for faster diagnosis and repair of service interruptions.
- Partnerships with customers to save energy and money — implementing proposed affordability, efficiency and demand response programs that leverage new technologies, working with customers to more effectively use electricity and manage their energy costs.
- Regulatory authority — supporting the investment plan and maintaining key credit ratios through future rate increases, the treatment of certain revenue and expense items and a mechanism to better match revenue with the cost of fuel and purchased power.
Downey continued, “We are very pleased with the level of community support and collaboration during the past year. Participants helped in identifying the issues and shaping the plan, which was much more productive than the traditional process. It has been a very inclusive process and the level of involvement has resulted in a much stronger plan.”
According to forecasts developed by KCP&L, the demand for electricity in the Kansas City area is anticipated to grow approximately 2% annually over the next 10 years. More generation capacity will be needed in the region. The plan’s new generation facilities will add 15% to KCP&L’s current generation capacity.
Because the availability of reliable, affordable energy is a key factor in business expansion and relocation, the plan is expected to make the Kansas City area an even more attractive place to live and do business. The plan has been endorsed by numerous local economic development agencies and chambers of commerce including the Overland Park, Shawnee, Northeast Johnson County and Olathe Chambers of Commerce, as well as the Kansas City Area Development Council.
KCP&L anticipates that the agreements, if approved by Kansas and Missouri regulatory commissions, will result in the expenditure of approximately $1.3 billion over the next five years. The agreements recognize that KCP&L will make major investments in infrastructure and environmental improvements, requiring the company to increase both debt and equity. The agreements give KCP&L regulatory mechanisms to be able to recover the prudent costs of its investments as they enter service and to maintain necessary credit quality over the five-year term of the agreements.
Current rates will remain in place until 2007, unless significant events impact KCP&L. The first rate case will be filed in 2006, with any rate adjustments going into effect for customers in 2007. The last rate case defined in the agreements is expected to be filed in 2009, with rates effective around the time the coal plant goes into service. Two additional rate cases could be filed in 2007 and 2008.
The Kansas agreement allows KCP&L to recover — on a dollar-for-dollar basis with no profit to the company — fuel and purchased power expense through an energy charge that would take effect for Kansas in 2007. A similar interim energy charge, based on forecasted costs and subject to refund, would take effect for Missouri customers, also in 2007. The agreements allow KCP&L to sell emission allowances and authorizes regulatory treatment of certain revenue and expense items, including pension expenses, designed to support the investment in the plan and the company’s credit quality.
The actual amount of costs to be recovered through rates will be determined by the state commissions in these rate cases. KCP&L projects that, if the entire $1.3 billion anticipated cost of the plan is included in rate base, the rate increases to support the five-year energy plan and projected increases in operating costs would average approximately 3-4% annually, over the same period.