Empire seeks nearly 20 percent rate hike

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October 29, 2009

Anonymous The Joplin Globe Thu Oct 29, 2009, 10:19 PM CDT

By Derek Spellman

dspellman@joplinglobe.com

Empire District Electric Co. is requesting a 19.6 percent rate increase, the company announced Thursday.

If the full request is approved, the average residential customer would see a monthly increase in the utility bill of about $19.21, assuming usage of 1,000 kilowatt-hours of electricity, the company said in a statement released after it had filed the request with the Missouri Public Service Commission.

Plant investments

Bill Gipson, Empire president and CEO, said the company is seeking the increase largely to recoup its share of the investment it has made in the construction of two new coal-fired generating units — one near Kansas City and one near Osceola, Ark. — that it jointly owns with other companies. The rate increase also would help the company recoup its share of the cost of environmental upgrades to a coal-fired unit near Kansas City that it also jointly owns, and absorb the operation costs that will accompany the three units.

“This case has been a long time coming,” Gipson told the Globe on Thursday, saying plans for the three projects started years earlier.

The upgrades to the one unit were completed earlier this year. Construction of the other two units is expected to be complete next summer.

Empire’s investment in the three projects is to total between $366 million and $378 million, according to a presentation from company officials.

If the request is approved by the Public Service Commission, the new rates would not become effective until the fall of 2010.

“I don’t see it any earlier than September of next year,” Gipson said.

Company officials said Empire began considering the plans years earlier, knowing that an agreement it had to purchase power from another coal-fired operation in Kansas was to expire in May 2010. That agreement could not be renewed because that plant would no longer have the capacity to continue supplying Empire, forcing the latter to find another source, Gipson said.

The construction of the new coal-fired units, in which Empire has a minority ownership, offered the “least-cost alternative” to absorb that power shortfall and continue meeting demand, Gipson said. The company also sought to avoid natural gas-fired generating units that he said would be more costly for customers in terms of providing power.

“It’s our obligation to do this and to find the least-cost alternative,” he said, noting that the company also had explored partnerships with other companies.

“There were a number of opportunities, but these two came to fruition.”

The project plans — but not the rate increases — for the work on the Kansas City area units were approved in 2005 by the PSC and in collaboration with the Office of the Public Counsel and the Missouri Department of Natural Resources, Gipson said.

As for the rate increase, Gipson said that will have to be reviewed by the PSC, which will conduct an “intensive audit” of Empire’s finances and conduct a series of hearings before reaching a decision. That is expected to take at least 11 months.

Previous boosts

In October 2007, Empire filed for a 10.11 percent hike in rates to recoup the cost of work on its Riverton, Kan., generating plant and its Asbury power station; to offset costs from damage in a January 2007 ice storm; and to help pay its part of a power plant construction project. The Public Service Commission granted the company a 6.7 percent rate increase in that case, with the hike taking effect in August 2008.

A number of residents voiced objections to that proposed hike during hearings last year in Joplin.

Among those opponents was Gisela Putnam, of Joplin.

Putnam told the PSC that she couldn’t afford more utility increases, especially on her fixed income, and she warned about the impact on the elderly.

‘Oh shoot’

“Oh shoot,” Putnam told the Globe after receiving word of Thursday’s proposal. “I do have a hard time with utilities.”

Putnam that she plans to speak out against the 19.6 percent increase when hearings are convened in this case. She said her electric bills exceed $80 a month.

“I sure will (speak),” she said. “Like I told them before, that this is just a little too high, and it can’t go any higher. It’s ridiculous.”

Maurice Filson, who also lives on a fixed income in Joplin, said he knows Empire has a need, and he knows there are ways homeowners can make their dwellings more energy-efficient.

But Filson also said there is a limit to what homeowners can do. For his part, he said he has “practically rebuilt my place” with everything from new doors to “maximum and beyond insulation.” Yet those measures only go so far, and residents don’t have “bottomless pockets,” he said. He said his utility bill was $88 this month.

“We can only go so far as a homeowner,” he said, also noting that residents have increasingly been saddled with increases in the costs of all utilities.

The cost of living index for utilities in Joplin, for example, was 96.5 percent of the national average as of the end of the second quarter this year, according to the statistics from the Missouri Department of Economic Development’s Web site. Joplin’s composite index — which includes not just utilities but also groceries, housing, transportation, health care and other services — was 86.1 of the national average.

“Oh my god,” said Monett resident Scott Grissom, who opposed Empire’s last increase. “Oh my god.”

He acknowledged that he was not well-versed in Thursday’s rate proposal, but he said, “I think it is absolutely ridiculous on the face of it.”

Like Putnam, he said he would voice his opposition again.

“I’d love to go to it,” he said of the hearings. “I’ll speak again.”

Gipson, though, said the projects have to be done and are the lowest-cost options for consumers.

“These are the least-cost alternatives,” he said. “There is nothing cheaper.”

Gipson also cited a statement from the Public Service Commission in August 2005, in which it approved the project plans. At that time, according to Empire, the commission stated that the plan struck “a reasonable and appropriate balance between the interests of Empire’s customers and shareholders.”