Kansas Regulators Vote Against Statewide Customer Choice
Following the Tortoise and the Hare maxim that slow and steady
often wins the race, the Kansas Corporation Commission (KCC) has
decided to approach retail competition at a turtle's pace. The KCC
last week tossed out the idea of installing statewide customer
choice and instead chose to leave open the possibility that Midwest
Energy, one of the state's many LDCs, can, if it chooses, file an
application for a small retail pilot program.
"The commission does not believe that it has sufficient evidence
at this time to institute full retail choice at the residential
level," the KCC said in its order. "The increased decentralization
of decision that would generally accompany retail choice will need
to be addressed to ensure system reliability. In addition, the
commission does not have sufficient evidence that there is a demand
for retail choice at the residential level... It is likely that
many customers will prefer to retain a bundled system and continue
to rely on the incumbent utility." The KCC also said there would be
too many difficulties dealing with tracking, accounting, metering
and reliability for it to move forward at this time.
However, Midwest Energy has indicated a willingness to be the
state's guinea pig in this matter by filing a pilot program
covering about 47,000 customers. "The Commission finds that a pilot
program may be helpful..... Accordingly, Midwest Energy is invited
to file its proposed pilot..," the order stated.
In the absence of statewide customer choice, the commission
encouraged LDCs to "evaluate the results of [lower transportation
eligibility thresholds] and the potential desirability of further
lowering the thresholds. Such an incremental approach to adding
additional levels of transportation customers may well allow the
LDCs to deal with the administrative and reliability issues in and
orderly manner." The KCC also ordered the LDCs to file a status
report on transportation each year.
Perhaps the most significant change made by the KCC last week
came in the form of a new proceeding designed to come up with
changes in the performance-based rate mechanisms that will apply to
all of the state's LDCs. All parties will have an opportunity to
comment on the matter.
The commission ordered staff to come up with an index-based
approach to rate setting and cost recovery. "Based on the comments
before it, the commission believes that a system which passes on an
index price of gas to customers is most likely to achieve the
stated goal of extending the advantages of the restructured natural
gas market to all of the state's retail customers." The KCC noted
the index or batch of indexes used might be different for each LDC
because of differences in location. However, the proposed mechanism
should be uniform for all the state's LDCs.
The commission also recommended that once the new index-based
mechanism is developed, the customers' bill should be unbundled to
show the effectiveness of the new pricing method.
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