TRANSMISSION

Supreme Court declines to hear Mo. cost-recovery case

If you're an aspiring blues guitarist, you may be able to master your craft by selling your soul to the devil at the intersection of Highways 49 and 61 in Clarksdale, Miss.

Just don't try to charge utility customers in Missouri the cost of transmitting electricity from a power plant near the mythical "crossroads."

That point was reaffirmed again Monday when the Supreme Court declined to hear Kansas City Power & Light Co.'s appeal of a lower court's decision to deny recovery of millions of dollars spent moving power some 500 miles from a natural gas-fired power plant in the Mississippi Delta to utility customers in western Missouri.

KCP&L sought review by the high court after lower courts denied appeals of a Missouri Public Service Commission order that denied the utility recovery of federally approved transmission costs -- a decision that will cost the utility $100 million over 20 years.

The utility said it is considering its options in light of the court's decision.

"We will assess the court's decision not to hear the case and evaluate pursuing relief in other appropriate venues or in future cases," a spokeswoman said in an emailed statement. She declined to be more specific.

But the ripple effects of the court's denial could extend much further and jeopardize billions of dollars in interstate transmission costs, according to a brief filed with the Supreme Court earlier this year by the Edison Electric Institute, the trade association for investor-owned utilities.

"The Missouri loophole is also uniquely positioned to spread like a virus to other states," EEI said, warning that the ability of a state utility commission to deny recovery of FERC-approved transmission costs could have a harmful effect on the development of new generation. Increasingly, the group said, natural gas and wind generation is being sited farther away from utility customers.

The 320-megawatt gas peaking plant at the center of this case was originally constructed as a merchant plant by Aquila Inc. in 2002. It was owned by the city of Clarksdale, Miss., for tax purposes, and power was purchased through a tolling agreement and resold on the wholesale market.

Kansas City-based Great Plains Energy Inc., the parent of KCP&L, acquired the plant in 2008 as part of its acquisition of rival Aquila, which had seen its stock fall into a downward spiral in the aftermath of the Enron scandal and was selling off assets to fortify its balance sheet.

Aquila's utility operations in western Missouri was renamed KCP&L-Greater Missouri Operations. And the Crossroads plant, which the company had unsuccessfully tried to sell, was added to the rate base as a source of power for the utility's 312,000 customers.

The Missouri PSC decided it was prudent to allow the utility to purchase power from the plant on behalf of customers. But the commission determined that approval of $5 million of annual interstate transmission costs at rates approved by federal regulators wasn't "just and reasonable."

Despite the fact that the plant is used only in the summer, KCP&L must pay for access to transmission year round, according to the commission.

KCP&L unsuccessfully sought a rehearing on the issue, contending that the decision to disallow FERC-approved transmission costs violated the supremacy clause of the U.S. Constitution, which prioritizes federal law above state law when there's a conflict.

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But other groups, including the Missouri PSC and another energy company, disagreed with KCP&L's interpretation.

In a court brief, Dogwood Energy LLC, a company owned by Kelson Energy Inc., said Aquila had unloaded other merchant generating plants at distressed prices but couldn't sell Crossroads and was stuck with the plant. Only after considering abandoning the facility did it assign the tolling agreement to the Missouri utility.

The company said the Missouri PSC assigned it to KCP&L's books and used a surrogate value that treated the plant as if it were in Missouri. And a Missouri plant wouldn't need interstate transmission costs, so none were allowed to be recovered.

"The Commission, with state court affirmation, simply protected ratepayers from being overcharged as a result of Great Plains Energy foisting on its regulated subsidiary GMO a contract interest in a power plant in another state that was an unwanted vestige of the pre-Enron era," the Dogwood Energy filing said.

Twitter: @jefftomich | Email: jtomich@eenews.net

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