Great Plains Energy Inc. and Westar Energy Inc. on March 7 reached settlement on certain issues of their proposed stock-for-stock merger of equals with several stakeholders, including the Kansas Corporation Commission staff.
The commission, or KCC, rejected their original proposal in April 2017, concluding that the transaction was not in the best interest of the public as proposed, aligning itself with staff, which had recommended a rejection.
The value of the combined entity as proposed would be approximately $14 billion.
Under the settlement, the companies commit to have operating headquarters in Topeka, Kan., and Kansas City, Mo., with the corporate headquarters at Great Plains Energy's current one in Missouri. The companies also agreed to maintain the staffing level at no less than 500 employees at the Kansas headquarters for at least five years after the deal closing and keep that office for at least 10 years.
The settlement also provides for the separation of debt and assets. Moreover, the companies commit that the future costs of service and rates of Great Plains Energy subsidiary Kansas City Power & Light Co. and Westar will not be adversely impacted by the merger. The burden of proof in showing that any increase to the cost of capital is unrelated to the deal will fall on the companies.
In relation to that, base rates should not be changed in Kansas until the expiration of a five-year term beginning at the final order date of KCP&L's 2017 base rate review. However, if the approved return on equity for either Westar or KCP&L's 2017 base review is below 9.3%, the moratorium period for the affected utility will be reduced to three years.
All merger-related savings are expected to be included at the update date of Westar and KCP&L's 2018 rate cases. An additional adjustment will be made to cover any shortfall in the targeted savings of $22.5 million for Westar retail electric customers and $7.5 million for KCP&L's Kansas retail electric customers.
The settlement is subject to the approval of the KCC. Aside from KCC staff, stakeholder signatories to the settlement are the Citizen's Utility Ratepayer Board, Sunflower Electric Power Corp., Mid-Kansas Electric Co. Inc, Kansas Power Pool, Midwest Energy Inc. and Brightergy.
However, the Kansas Industrial Consumers Group Inc. is petitioning the commission to extend the three-day deadline in filing testimony opposing the settlement to March 15.
Kansas Industrial Consumers Group was not a signatory to the settlement, although it participated in discussions until the morning session on March 2. According to the group, it was not contacted to join for the afternoon session on March 2 but noted that it could be an unintentional miscommunication.
The group, however, called the allegation that it "voluntarily absented" itself from the settlement discussions as unfounded. (KCC Docket No. 18-KCPE-095-MER)
The merger is expected to close in the first half of 2018. FERC recently approved the transaction.
