Commissioner Moeller's statement on rate freezes and
the recently held Kansas Transmission Summit
"I bring to the Commission's attention an order that we issued back on December 7.
The order (Docket No. EC06-46) authorized the transfer of jurisdictional facilities
between Aquila and Mid-Kansas Electric Company. At issue was the sale and
transfer of certain assets from Aquila to Mid-Kansas. Those assets included
transmission lines, interests in generating capacity, and wholesale power sales
agreements.
I supported this order as I believe that this transaction met the requirements of
section 203 of the Federal Power Act. However, I mention this case today to
highlight the fact that in making our determination, one element of the transfer that
we reviewed was that Mid-Kansas would largely freeze retail rates for five years after
acquiring the assets from Aquila. While the Commission has generally viewed rate
freezes - particularly in merger cases - as a customer protection device, I may not
reach this conclusion in every instance. Recent events have shown us that retail rate
freezes do not always result in the initially advertised benefits once the caps are
removed. And since the future is hard to predict, utilities may be forced to book
"deferred balances" when costs exceed revenues from the frozen rates. In a rising
or high fuel cost environment, rate freezes could result in future ratepayers
subsidizing current consumption and sending the wrong price signal and at the same
time thwarting any potential for price competition. I will remain open to considering
the promised benefits of rate freezes.
Speaking of Kansas utilities, I recently attended the fourth annual Kansas Electric
Transmission Summit that was held in Lawrence. The Summit - sponsored by State
Representative Tom Sloan and attended widely by stakeholders - focused on
initiatives that Kansas is using to encourage the development of transmission
projects. I was particularly impressed with the leadership that Rep. Sloan and his
colleagues have shown and I was impressed to see that Kansas is not waiting for a
solution, but is moving forward on its own and using innovative methods to solve the
all-too-common problem of transmission constraints and the lack of adequate
transmission infrastructure. Without question, Kansas is setting the example for
other states to follow - as I believe the first step in solving transmission constraints
is to recognize the problem early and then take ownership of the solution. That's
what Kansas is doing at the state level and I commend them for it."
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