Following the Tortoise and the Hare maxim that slow and steadyoften wins the race, the Kansas Corporation Commission (KCC) hasdecided to approach retail competition at a turtle’s pace. The KCClast week tossed out the idea of installing statewide customerchoice and instead chose to leave open the possibility that MidwestEnergy, one of the state’s many LDCs, can, if it chooses, file anapplication for a small retail pilot program.

“The commission does not believe that it has sufficient evidenceat this time to institute full retail choice at the residentiallevel,” the KCC said in its order. “The increased decentralizationof decision that would generally accompany retail choice will needto be addressed to ensure system reliability. In addition, thecommission does not have sufficient evidence that there is a demandfor retail choice at the residential level… It is likely thatmany customers will prefer to retain a bundled system and continueto rely on the incumbent utility.” The KCC also said there would betoo many difficulties dealing with tracking, accounting, meteringand reliability for it to move forward at this time.

However, Midwest Energy has indicated a willingness to be thestate’s guinea pig in this matter by filing a pilot programcovering about 47,000 customers. “The Commission finds that a pilotprogram may be helpful….. Accordingly, Midwest Energy is invitedto file its proposed pilot..,” the order stated.

In the absence of statewide customer choice, the commissionencouraged LDCs to “evaluate the results of [lower transportationeligibility thresholds] and the potential desirability of furtherlowering the thresholds. Such an incremental approach to addingadditional levels of transportation customers may well allow theLDCs to deal with the administrative and reliability issues in andorderly manner.” The KCC also ordered the LDCs to file a statusreport on transportation each year.

Perhaps the most significant change made by the KCC last weekcame in the form of a new proceeding designed to come up withchanges in the performance-based rate mechanisms that will apply toall of the state’s LDCs. All parties will have an opportunity tocomment on the matter.

The commission ordered staff to come up with an index-basedapproach to rate setting and cost recovery. “Based on the commentsbefore it, the commission believes that a system which passes on anindex price of gas to customers is most likely to achieve thestated goal of extending the advantages of the restructured naturalgas market to all of the state’s retail customers.” The KCC notedthe index or batch of indexes used might be different for each LDCbecause of differences in location. However, the proposed mechanismshould be uniform for all the state’s LDCs.

The commission also recommended that once the new index-basedmechanism is developed, the customers’ bill should be unbundled toshow the effectiveness of the new pricing method.

Rocco Canonica

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