Joplin-based Empire District Electric Co. (NYSE: EDE) has filed requests for rate increases of 19.6 percent and 24.6 percent for Missouri and Kansas, respectively, citing costs associated with building new generating units and environmental upgrades at its locations in Asbury and Riverton, Kan.
Empire expects the changes, if approved, to take effect around fall 2010 for Missouri and summer 2010 for Kansas. The average rate increases will be about the same for both residential and commercial customers.
Amy Bass, director of corporate communications for Empire, said the average number of kilowatt hours used by residential customers during 2008 was 13,871, or 1,156 kWh per month - meaning the average rate increase would be about $22.19 more per month for Missouri customers and $28.46 for Kansas customers.
The 100-year-old publicly traded utility provides electricity, natural gas and water services to 215,000 customers in a four-state area. Empire serves electric customers in 16 southwest Missouri counties, including Greene, Christian and Taney counties.
Changing needs
Bass said the rate increases are necessary to meet customer needs and pay for related infrastructure upgrades. Additionally, the company had leased 162 megawatts of energy for its Cherokee County customers from Wichita, Kan.-based Westar Energy, but as the contract neared its end date, Westar declined a request to renew, saying that it now needed the energy for its own customers.
"That was a 15-year contract and it expires June 1, 2010," Bass said. "We have to replace that, plus we have to meet the growth that we are experiencing. We were already looking forward when we signed that contract 15 years ago, and we've gone through a fairly exhaustive study of options."
Empire currently has more than 10,000 customers in Kansas. To continue serving Cherokee County, Bass said one of the company's alternatives was to add generators and make other equipment investments. Missouri customers have been paying for environmental upgrades at the Asbury plant and the addition of a generator in Riverton, Kan., since Missouri's last rate increase was approved in 2007.
Matt Vogel, who owns a Papa John's franchise in Webb City, said that a 19.6 percent rise in rates is more than enough to hurt his business.
"If you drive down the street right now on any weekend, there are price wars on any kind of food just to keep the doors open," Vogel said. "We're paying more for utilities than rent. The owners and franchisees are the ones who are taking a hit just to survive. (If this is approved), there has to be a price increase (in product)."
The states' say
There is no guarantee that the rate increases will be approved in full, or at all, by the Kansas Corporation Commission or the Missouri Public Service Commission. Both state agencies will conduct audits of Empire's operations in an effort to determine whether all of the details within the requests are valid. They also will conduct evidentiary hearings and hold public hearings in which residents in the affected areas will be able to express any concerns they might have about the rate increases.
"Ultimately, what they're looking for is: Are the rates just and reasonable?" said Abbie Hodgson, director of communication for the Kansas Corporation Commission. "Has there been prudent management of the company? We have to balance the best interest of the ratepayers and the best interest of the investors."
The Missouri Public Service Commission will begin its hearings on May 3, 2010, while the Kansas Corporation Commission, having received its filing a few days later, has not yet set a date to begin its hearings. Hodgson said it's unlikely the KCC would make any decisions on the requests before summer 2010.
The last Missouri rate increase requested by Empire was for 11.6 percent, filed in October 2007. The Missouri Public Service Commission approved an increase of 6.7 percent.
According to the Kansas Citizens' Utility Ratepayer Board, the last Kansas rate increase requested by Empire was for about 25 percent and was filed in 2005. The Kansas Corporation Commission ultimately approved a 12.67 percent increase.
Empire posted third-quarter earnings of $14.8 million, or 43 cents per share, down 27 percent from the $20.2 million or 59 cents per share in the same quarter of 2008. Empire shares closed Nov. 11 at $18.25, compared to a 52-week range of $11.92 to $19.25.[[In-content Ad]]
