Great Plains Energy, Inc. (ticker: GXP, exchange: New York Stock Exchange (.N))
News Release -
Aquila Meets with Community and State Leaders on Rate Filing Planned for St. Joseph Area Electric Customers
ST. JOSEPH, Mo.--(BUSINESS WIRE)--May 19, 2005--Richard C. Green,
chairman and chief executive officer of Aquila, Inc. (NYSE:ILA), will
meet today with community and legislative leaders to discuss the
company's plans to request a rate increase to recover costs associated
with service for its electric customers in its former St. Joseph Light
& Power service area.
"We understand no one likes to see increases in the costs of daily
essentials like electricity, and we don't like to ask for them
either," Green said. "We believe it's important to meet with leaders
in the service area before our rate request filing to explain why we
are requesting an increase.
"Our employees have done a great job in holding down our ongoing
operating costs since our last rate increase," Green added. "However,
there are pressures on our business, most of them outside our control,
which now put us in a position of having to seek an increase.
Recovering these costs helps ensure that our customers will benefit
from our continued operational improvements."
At the meeting in St. Joseph, Green will outline the company's
plans to formally file with the Missouri Public Service Commission in
late May for a 6.2 percent increase, equating to $7 million, for
Aquila's 60,000 electric customers in the former St. Joseph Light &
Power service area.
The proposed rate increase would result in approximately $4.54
monthly for the average residential customer in the St. Joseph area
using 1,000 kilowatt-hours of electricity a month. If the rate request
is approved, an estimated 91 cents of every dollar collected from
customers will be used to support the ongoing operation of the St.
Joseph electric utility. This includes such expenses as fuel costs,
operational improvements and maintenance. In addition, Aquila was able
to reduce the amount of its rate request nearly $7 million by selling
excess power to off-system customers.
Normally it takes approximately 11 months to receive approval from
the Commission before customers are affected by new rates. In the
regulatory process for Missouri utilities, it typically takes more
than two years from the time a utility incurs costs before those costs
are recovered in customers' rates.
The key reasons for the rate increase are:
-- Rising cost of fuel to generate electricity, mainly natural
gas and coal.
-- The need to expand electric service into new community
developments, as well as new and expanding businesses.
-- Increasing usage of electricity as more homes and businesses
expand their use of computers and other electronic equipment.
-- Cost of operating capital specifically for the St. Joseph area
Green explained that although Aquila previously announced that it
might sell the St. Joseph Light & Power properties, it was necessary
to file for a rate case. "The properties may or may not be sold, and
it's important to begin the regulatory process to recover costs in
providing reliable electric service," he stated.
Rising Fuel Costs
The utility is currently seeking to recover $6.3 million in higher
fuel costs above current rates. U.S. natural gas prices have been
significantly higher in the past two years. In addition, the costs of
coal used to generate power also have increased. If a pending fuel
adjustment clause is enacted in Missouri, Aquila may be able to
mitigate the base fuel cost and pass through both rising and falling
costs to customers in a more timely manner.
Under its current Interim Energy Charge (IEC) structure, approved
by the Commission, the company is able to recover gas costs up to
$5.14 per Mcf (one thousand cubic feet). Aquila's IEC is scheduled to
end on April 22, 2006. At that time the fuel charge would drop to
$3.50 Mcf from $5.14 per Mcf, without approval of new base rates or
the enactment of the pending fuel adjustment clause.
"Currently, we are seeing increased demand for natural gas on a
global basis, and this is causing much higher prices on commodity
markets," Green said. "Although our employees work to keep our costs
lower, higher energy prices are affecting all segments of the U.S.
The utility has spent $9.7 million related to expanding its St.
Joseph region network and other facilities to support community
growth. However, community and business growth is fueling only part of
this increasing need for more electricity. In the last nine years, the
average homeowner's use of electricity has risen 9 percent, mostly
because of the increasing use of home computers and other electronic
equipment, which also mirrors a national trend.
In addition to improvements and expansion for electric
transmission and distribution, the company recently completed its
Alabama Street substation project in St. Joseph.
Another rate increase factor is the cost of capital required to
operate Aquila's St. Joseph electric utility. This includes
depreciation of utility facilities such as power plants and electric
infrastructure. Traditionally, the cost of removing utility assets has
been included in the rates of customers currently benefiting from
their operation. In recent years, however, this cost has been deferred
for payment in customer rates until the asset ceases operation. The
company is requesting to return to the more traditional approach of
recovering these salvage costs from current customers.
After the proposed increase, Aquila's electric rates would compare
favorably to other utilities in Missouri. From 1985 to 2004, the
Consumer Price Index has increased over 81 percent while the St.
Joseph area electric rates have increased only 5.2 percent.
Helping Customers, Helping Communities
Green added, "We know there are customers who can ill afford any
type of increase in their daily costs, so we are participating in a
number of programs that provide them with some financial support."
Among these programs is the company's Aquila Cares initiative. The
company matches 50 cents for every dollar contributed by its utility
customers for low-income energy assistance in its Missouri service
area. In 2004, this program provided more than $37,000 in donations to
help low-income Missouri utility customers. Aquila also has provided
$93,500 of non-ratepayer funds for a low-income weatherization program
that is administered by the Missouri Department of Natural Resources.
Also, the company offers free mail-in energy audits to assist
residential customers in holding down their electric costs. In
addition, Aquila offers a program that makes available high-efficiency
light bulbs priced below market value for its Missouri electric
customers. In St. Joseph, Aquila is currently conducting a fixed bill
pilot program, WeatherFriendly Billing, which allows customers to pay
the same amount each month for their electric service. This customer
choice program is the first of its type in Missouri.
Besides making tangible contributions to assist customers
financially, Aquila is actively involved in providing electricity
using environmentally clean, renewable sources. Aquila is the first
Missouri utility to provide wind power to its customers. The company
purchases all the output from a wind farm in southwest Kansas. Nearly
90 percent of all electricity from this wind farm is earmarked for
Aquila customers in Missouri and Kansas. In 2004, Aquila provided
$75,000 of non-ratepayer money for a tall tower wind assessment study
by the Missouri Department of Natural Resources to further potential
wind power development in the state.
The company's last increase for the St. Joseph electric service
area was 3.68 percent in April 2004. The IEC portion of the previous
rate increase was 2.72 percent.
Aquila serves 346,000 electric and natural gas customers in
Missouri. Based in Kansas City, Mo., Aquila provides electricity and
natural gas delivery service to 1.3 million customers in Missouri,
Kansas, Colorado, Michigan, Minnesota, Iowa and Nebraska.
CONTACT: Aquila, Inc.
George Minter, 816-467-3772 (Media Contact)
Aquila Media Line, 816-467-3000 (Media Contact)
Neala Clark, 816-467-3652 (Investor Contact)
SOURCE: Aquila, Inc.