[BETA] Fortnightly

A retiree from Kansas writes the FERC to ask why it lets utilities "punish" their customers.

When senior citizens with time on their hands start taking an interest in utility regulation, you just know that's big trouble for bureaucrats. Ask James Hoecker, chairman of the U.S. Federal Energy Regulatory Commission.

Last month Hoecker opened his email box to find a short message from one Hersch Davis, a retiree from Wichita, Kan. Davis wrote the chairman on Sept. 8 to ask him why he lets utilities foist high rates on some customers without any rhyme or reason - but spare others simply because of where they live. Isn't that redlining?

In his email to Hoecker, Davis complains of high electric rates in some parts of Kansas - a disparity made even more glaring by the upcoming "Westar" merger. That deal would combine Western Resources with Kansas City Power & Light Co., but would lock in high rates for Wichita residents - prices much higher than in Topeka or Kansas City. Why, you ask? It's all because Wichita takes service from Kansas Gas & Electric, which invested heavily in the high-cost Wolf Creek nuclear plant before it was taken over by Western Resources in 1991 and reorganized as a wholly owned subsidiary.

Today, however, KGE has no employees to call its own. It is operated by employees of Western Resources. And the Westar merger would run the combined KGE/KPL/KCP&L properties as a single integrated system, providing even less reason to segregate costs incurred more than a decade ago by a then-independent KGE utility. Yet the Westar deal would leave Wichita residents living in the past, forced to continue to pay for the Wolf Creek misstep, even while handing over any surplus capacity from costly investment to the holding company, at bargain basement rates set at less than arm's length, according to some.

Moreover, in its order of last month approving the Westar merger, the Kansas Corporation Commission froze rates at current levels for four years but did nothing to lessen the rate disparity. It attributed the disparity to "cost of service factors" existing before 1991. As the KCC explained, its approval plan for the Westar merger "does not present an opportunity to directly address differences in rates." (Docket No. 97-WSRE-676-MER, Sept. 28, 1999.)

But I digress. Instead, listen to Hersch Davis. I could never hope to explain it as beautifully as he did in his email to the FERC chairman:

"I understand their argument that the old KG&E built Wolf Creek nuclear plant with over capacity [and] is charging a penalty to local users for that. ¼ What I do not understand is when summer comes and I use my air conditioning and in turn use some of that so-called 'over capacity,' I am charged an additional premium or penalty.

"How much must I be ¼ punished ¼ before the [Kansas utility commission] and the FERC take appropriate action? ¼ Where is the governor while this is going on?"

ON PURELY LEGAL GROUNDS, HOECKER GETS OFF THE HOOK. The answer is simple: The FERC