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Kansas Regulators Vote Against Statewide Customer Choice

November 8, 1999
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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.

Rocco Canonica

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