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AARP Kansas Testifies At Atmos Energy Rate Hike Request Hearing

Atmos Energy rate hearing 2015

 

AARP Kansas Advocacy Volunteer David Wilson provided testimony at the Atmos Energy rate hike request public hearing on December 1, 2015 in Overland Park.  Wilson was the only member of the public to speak at the hearing which was live-streamed on the Kansas Corporation Commission (KCC) website.

According to the KCC website, on August 13th, 2015, Atmos Energy filed an application with the Kansas Corporation Commission for a $5.6 million base rate increase, stating that current rates are not sufficient to cover costs or provide a reasonable rate of return. Atmos has 131,000 customers across 33 counties in Kansas.

The request amounts to an overall revenue increase of 11.4%. If approved, the average monthly bill for residential customers in Kansas will increase $3.78 per month. The increase for commercial customers would be $9.74 per month. Atmos also requested a return on equity for its shareholders of 10.5%.

Wilson told the KCC the dramatic escalation in utility rates that consumers in Kansas and across the nation are seeing poses a special concern for older households. He said older consumers tend to devote a higher percentage of their total spending towards residential energy costs than other age groups, and they often have special safety concerns with regard to their continued access to utility services.

Below is the testimony provided by AARP Volunteer David Wilson:

December 1, 2015

Chairperson Albrecht

Commissioner Apple

Commissioner Emler

Kansas Corporation Commission

Office of Public Affairs and Consumer Protection

1500 SW Arrowhead Road, Topeka, Kansas 66604-4027

Re: AARP Kansas Comments on Atmos Energy Service Rate Increase Request, Docket No.16-ATMG-079-RTS

By David Wilson, AARP Kansas Lead Volunteer dwilson@aarp.org or toll free at 1-866-448-3619

AARP is a nonprofit, nonpartisan membership organization that advocates for people who are 50 years of age and older, seeking to promote their independence, choice and control in ways that are beneficial and affordable to them and to society as a whole. One way AARP promotes the well-being of older persons is through its advocacy for reasonable utility rates and services. AARP Kansas has more than 320,000 members across the state, many of whom are Atmos customers. These member households, and all older Kansans, would be adversely impacted by another significant rate increase in their utility bills.

I appreciate how carefully members of this commission consider requests such as the one before you tonight. I know that many hours of deliberation go into your decisions and the overarching impact your decisions have on citizens and the business community.

The dramatic escalation in utility rates that we are seeing in Kansas and across the entire nation poses a special concern for older households. All consumers must be able to rely on the availability of safe, affordable, and high-quality utility services. Utilities— including telecommunications, electricity, natural gas, water, and sewer services—are all crucial to health and personal welfare. Older consumers tend to devote a higher percentage of their total spending towards residential energy costs than other age groups, and they often have special safety concerns with regard to their continued access to utility services.

AARP Kansas 2015 Utilities Survey

In June of 2015, AARP commissioned a survey of voting Kansans 45+ to determine their views on issues related to utilities and on Atmos’s most recent rate request. Significant findings were as follows:

  • More than 80% say an increase in utility bills would be a major or minor problem for them.
  • Most say their electric or natural gas bill has gone up or stayed the same.
  • About half are extremely or very concerned about their electric (53%) or natural gas (45%) bill going up.
  • 20% say they or someone they live with depends on the home being a certain temperature because of a medical condition.
  • 28% say they have had to make adjustments in order to pay for their electric or gas utility bill.
  • Most do not feel their elected officials are doing enough to lower the cost of their electric (64%) or natural gas (60%) bills.
  • They also do not feel that the interest of the residential consumer is represented or considered (62%).
  • 79% oppose utility companies increasing the fixed month charge that is imposed on consumers prior to using gas or electricity.
  • They support (61%) the requirement for a thorough review process for surcharges that are attached to special projects and environmental compliance.
  • They oppose automatic rate increases prior to a complete review by the utility commission.
  • Most support (85%) a full and thorough financial audit of utility company audits. They also believe that when the audit finds a higher profit than authorized, the company should reset the rates so customers are paying the accurate rate (90%).

 

Formula Rates

AARP opposes the company’s request for special formula rates. Formula rates would make rate increases too automatic in the future, bypassing the thorough audit and review of a rate case. Formula rates are a major concern to consumers. They can be described as an "automatic" rate increase plan, although there would be some review by the KCC. It would certainly "streamline" rate increases, bypassing and reducing the ability of the KCC to thoroughly audit and review rate increase proposals. However, there would be less incentive for cost controls. Moreover, there would probably be less opportunity for public input, and less opportunity for settlements that include a broad array of stakeholders. Most importantly, offsetting cost reductions and adjustments to returns on equity (ROEs) would not get proper vetting.

Mandatory Customer Charge

Atmos Energy is requesting a $3.87 increase in residential customer charge. AARP opposes raising the mandatory customer charge. Keeping that fixed charge where it is, and applying any rate increase to usage-based charges, allows customers better control over their gas bill and encourages conservation. The current customer charge is already too high.

State commissions across the country have rejected utilities’ attempts to raise fixed monthly customer charges. Regulators in Kentucky, Missouri, Minnesota, Missouri, Washington, Wisconsin and Michigan have rejected these proposals. We urge Kansas regulators to follow this pattern as you have done for similar requests by electric utilities.

Many older consumers diligently dedicate themselves to conserving their home energy usage in an effort to keep their energy bills more affordable. Those consumers should be receiving the full economic benefit of their careful conservation efforts. It is frustrating for them to see the rewards of their frugality minimized.

 

Return on Equity

Atmos is requesting a 10.5% return on equity. A 10.5% ROE, or corporate profit, is too high for a monopoly utility, and this request should be reduced. AARP Kansas, and older Americans, understands that essential services such as utilities cannot be provided at a resulting financial loss for the providing corporate entities. However, the rate of return on investment for utilities should be fair and reasonable. Utility providers must remember their responsibility to the public they serve as well as to their investors, especially at a time when many older Kansans on low to moderate incomes are struggling to make financial ends meet.[1] The return on equity requested by Atmos is higher than what could be justified by current economic conditions and higher than the rates granted utilities in other states.

There is simply no justification to award Atmos stockholders excessive profits that will be coming out of the pockets of struggling Kansas families. Many older Kansans face tough choices with very little flexibility in their budgets, and even a few dollars more per month on their utility bills could mean they must cut back on other essentials such as food and medication.

Many older Kansas residents want to remain in their homes but rely on Social Security (which will not be increasing in 2016) for their income and already must make tough choices between heating their homes, putting food on the table, and purchasing medications. These older Kansans should not be asked to fund the excessive profits or rate increases requested in this Atmos proposal. AARP members in Kansas – many of whom are residential customers of Atmos – rely on affordable and reliable energy to keep their homes warm.

The US Department of Agriculture, Economic Research Department (ERS), Food Price Outlook 2015 Consumer Price Index (CPI) for all food decreased 0.3% from February to

1 A total of 92%, or 362,172, of older Kansas residents received Social Security in 2012. The average annual benefit was $15,400. Social Security accounted for 55% of the typical older Kansan’s family income. Low- and middle-income older adults in Kansas are even more reliant on Social Security’s earned benefit, typically receiving 79% of their family income from Social Security.

 

March and is now 2.3% above the March 2014 level. The food-at-home (grocery store or supermarket food items) CPI was down 0.5% in March but was 1.9% higher than last March. Looking ahead to 2016, ERS predicted that supermarket (food-at-home) prices will see normal to slightly-lower-than-average food price inflation, increasing 2.0 to 3.0% overall.

A new analysis indicates prices rose significantly across the board for all types of medicines. Overall, prices for brand, generic and specialty drugs combined increased 10.9% in 2014 from the year before, according to Truveris, a research firm that tracks drug pricing. Also during 2015, the Kansas Legislature, in their search for funding to eliminate the state’s fiscal deficit, increased sales tax for all Kansans from 6.15 to 6.5% on all sales, including food.

All of this while the Office of Social Security, based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2013 through the third quarter of 2014, and provided a cost of living adjustment (COLA) of 1.7% to Social Security and Supplemental Security Income (SSI) beneficiaries for 2015. The benefit for 2014 was 1.5%.

In April, 2015, in the Ameren Missouri Rate Case, the Missouri Public Service Commission determined that Union Electric Company d/b/a Ameren Missouri (Ameren Missouri) should receive a 9.53% return on equity (ROE). Therefore, AARP Kansas asks the Commission to specifically reject the Atmos request for the proposed 10.5% return on equity.

Special Surcharges

AARP strongly supports a safe, leak free modern natural gas infrastructure. That is the gas company’s legal obligation, and the funds to do this are already in Atmos base rates. AARP Kansas opposes special surcharges. Such costs can already be recovered fairly through base rate mechanismss.

 

Regulators should ensure that utility rate changes occur within the context of a full rate case review and depart from this approach only when a utility can demonstrate that extraordinary circumstances jeopardize its financial condition and require emergency or interim action. Regulators should require full rate case reviews at intervals short enough to ensure that the utility remains accountable to its customers.

If policymakers allow a utility to recover a portion of its expenditures via a surcharge or tracker on a ratepayer’s utility bill, the following minimum consumer protections should be in place:

  • A surcharge should recover only clearly defined costs, should expire in a reasonable period of time, and should undergo an audit or review (including public comment opportunities) to determine whether it achieved the intended result.
  • The number of surcharges and trackers available to any one utility should be limited.
  • A surcharge or tracker should be designed so that cost overruns are absorbed by the utility and underspending is returned to ratepayers.
  • The amount of a surcharge should be reduced to reflect utility cost savings when revenue from the surcharge funds’ investments, such as upgrades in plant equipment, improves efficiency.AARP Kansas respectfully requests that the KCC:
  • Conclusion:
  • reject the Atmos request for increases to monthly customer charges;
  • reject the Atmos request for the proposed 10.5% return on equity;
  • reject the Atmos request for special formula rates and surcharges.Respectfully David Wilson
  • I hope that you will grant very careful consideration to this request, keeping your consumers and constituents first and foremost in your minds as you consider any rate adjustments.

For more information about the Atmos Energy rate hike request, visit http://www.kcc.state.ks.us/



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