Topeka Mayor Fights To Keep Area Electric Rates From Paying For Wolf Creek

News/Editoral

By Jon A. Brake

The electric rates in the City of Manhattan and Riley County could be going up. The City of Wichita has filed a
complaint with the Federal Energy Regulatory Commission because Wichita's electric rates are higher than
Topeka, Manhattan and other Northeastern communities.

Mayor Joan Wagnon of Topeka has been fighting a one person war to keep the area from paying for the 1 Billion
dollar Wolf Creek Power Plant.

Wagnon needs help from the citizens of Manhattan and Riley County and from our leaders. Where have our
leaders been anyway? Why have they not helped in this fight?

Phone our leaders (the numbers are on page 4) and ask them to get into this fight. Call KPL and tell them what
you think of a twenty-five percent increase in rates. When you send in your electric payment add a note and tell
them what you think.

This is not a one person fight. It is a fight that we all need to be in. Here is a letter Mayor Wagnon sent to the
City of Manhattan:

To All Legislators, Mayors and City Administrators in the KPL service territory:

On April 26th legislators from the Kansas Power & Light (KPL) service territory at the Capitol met with City of
Topeka officials to discuss the complaint filed by the City of Wichita with the Federal Energy Regulatory
Commission (FERC). At that meeting significant concern was expressed about the impact on our communities
from the City of Wichita’s effort to force KPL customers to pay higher rates in order to lower those of Kansas
Gas & Electric (KGE) customers. Those legislators represented asked for both background information on the
issue and follow-up information on the FERC complaint which I am attempting to provide now.

The Rate Parity Issue

As you may know, the KPL electric rates are approximately 26.2 percent lower than the KGE rates in large part
because KGE chose to construct the Wolf Creek Nuclear Generating Facility and the cost was much more than
anticipated. In the 1991 KPL-KGE merger in which Western Resources was formed, Wichita fully supported the
merger of these two companies because the KGE area was facing an immediate 50 million-dollar rate increase.
Not one party to that hearing suggested that KPL should pay for Wolf Creek because the merger would not have
occurred if that had been possible. As a matter of fact, the Kansas Corporation Com-mission’s (KCC) order
approving the merger specifically provided that the KPL rate payers should not be required to bear the burden of
Wolf Creek. Wichita was in complete agreement and rate parity was rejected.

Things have now changed. Wichita is now demanding rate parity, and is even threatening not to renew their
franchise agreement with KGE and to create their own municipally owned electric utility if rate parity is not
achieved! They filed a complaint before the Federal Energy Regulatory Commission to force rate parity which
had been denied in other regulatory arenas. The matter is now pending before FERC, but since FERC can only
regulate wholesale rates, it is likely that the question of rate parity will end up back before the KCC where it
should be.

The Complaint Before FERC

The City of Topeka has participated in four sessions in Washington with the assistance of our lawyers and
economists, in a good faith effort to resolve the issues presented in the Wichita complaint. While the specific
content of all the proposals which were discussed is confidential, I believe I can share my impressions with you.

Yesterday in Washington, at a settlement conference convened by FERC, it seemed clear to those of us
representing Topeka and the KPL point of view, that the talks were going nowhere. Every proposal offered would
have increased our rates, and violated the basic principle, that we should not have to pay more to lower Wichita’s
rates.

Those settlement discussions have become expensive, pointless and even counterproductive since the issue
revolves around the setting of retail rates and clearly, that is outside the jurisdiction of FERC. These discussions
belong at the Kansas Corporation Commission, even if the staff is already biased on the issue of rate parity
between KPL and KGE.

Judge Wagner, the FERC judge presiding over these settlement discussions, has assured us that if Western
Resources and the City of Wichita reach an agreement we cannot live with, we can still contest that settlement at
FERC - and in fact, this issue may yet be litigated in a full-blown hearing before the Commission.

What Happens Next?

The ratepayers and leaders in the KPL area communities must stand up and be heard.

It is likely that the matter will end up back at the Kansas Corporation Commission where it belongs because
FERC doesn’t have jurisdiction over the setting of retail electric rates - only wholesale rates. While it is true that
the KCC has expressed its desire to work toward rate parity over a long period of time, we must remember that
the rate payers from the KPL area were not involved in the KCC proceedings in 1997 that awarded a
disproportionately large share of merger savings to KGE customers. The voices of the consumers have not been
fully heard.

Here is some additional information you need to know about this case.

1. Western Resources is building new generating facilities, $210 million worth over the next several years, which
will benefit KPL customers. In principle, KPL customers should pay for additional generating capacity we use,
which could require a future rate increase, but in reality, there is no way to determine the amount to go into our
rate base without a hearing before KCC.

Western will be selling the excess power from these new generating facilities on the open market, making a lot of
money. We contend that income needs to be credited against the costs of constructing those generating facilities
rather than putting the full costs into our rate base. If KPL needs the facilities, then the profits from these sales
should first be used to reduce the costs of the facilities before any additional profits are sent to shareholders.
This needs to be decided at the KCC, not in Washington.

2. The second question is whether our current rates are adequate, too high, or too low. Rates are usually
determined by what it costs to provide the service. Our experts tell us there may be significant over-earnings in
KPL if a rate case were held today. In other words, the costs of providing the service may be less than income
derived.

We haven’t asked for a rate decrease-just to be left alone with stable rates and use some of that over-earning,
along with revenues from power sales, to offset the cost of the new facilities. That could hold our rates stable for
some time.

This issue must be also decided in a KCC hearing, not FERC.

3. The electric franchise for the City of Wichita is up for renewal, providing them with extraordinary leverage,
since they can threaten not to renew it. Wichita is currently studying the issue of creating a municipal electric
utility. The results of a study they have commissioned are due back this summer. One reason for the delay in
negotiating a new franchise agreement is they are waiting for the results of this study.

Creating a Wichita municipal electric utility could have a huge effect on KPL customers if Wichita doesn’t renew
its franchise agreement with KGE. If Wichita fails to renew its franchise and pulls out of the KGE service area, it
is hard to tell what would happen to the power company - but higher rates, uncertainty about stranded costs,
outside ownership are all possibilities.

As legislators, you should be pleased Kansas Law doesn’t allow them to municipalize.

This issue of parity between KPL and KGE is potentially one of the biggest, most divisive issues we have seen in
Kansas since property reappraisal and school finance dominated the headlines.

I would be willing to visit with any of you by phone, or even in you home communities about this issue. There are
several news articles attached to help explain the issue a little better.

Or, have your city attorney contact our legal counsel, John Frieden at 785-232-7266.

The bottom line is that all of us must become as vocal as our neighbors in the KGE area or we can see the cost of
electricity rise dramatically, hurting everyone from residential to business consumers.

The City of Topeka has been carrying the message up until now. But we need your help.

Joan Wagnon,

Mayor of Topeka