Victory Electric is asking customers to remove the energy cooperative from the jurisdiction of the Kansas Corporation Commission, the agency that regulates, among other things, utility rate increases.
The Victory Electric Cooperative is asking its customers to free the power company from the jurisdiction of the Kansas Corporation Commission which scrutinizes and approves rate increases by utilities.
Under state law, an electrical cooperative can remove itself from the authority of the KCC by a mail-in vote of its members, that is, customers. Victory will hold a special meeting on the subject on April 22 at 6 p.m. at its corporate office; ballots will be sent out soon after.
The proposal is not about allowing for unmitigated rate increases, Victory spokesperson Jerry Imgarten said, but rather to decrease annual fees to KCC and the costs tangential to filing a "rate case" with the state utility commission.
Currently, the company pays $12,000 in annual fees to KCC. The rate increase in 2010 under KCC authority incurred costs of roughly $215,000 in various filing, publication and attorney fees, according to Victory President Shane Laws.
That process can take more than a year.
This compares to the $23,000 in consulting fees prior to the 2011 rate increase for the deregulated "native" customers outside the jurisdiction of the KCC, a matter settled in six months.
Last year, Victory Electric collected nearly $65 million in revenue according to its most recent financial disclosure.
The vote will also determine the regulatory fate of the so-called "native" Victory customers that were members of the co-op before its acquisition of the investor-owned Aquila utility in 2007.
Victory members, generally households and businesses outside of an incorporated municipality, voted to deregulate in 2000. Since the acquisition of Aquila by Victory and a coalition of five other cooperative power companies, rates concerning former Aquila customers have been regulated under the KCC.
Dodge City and Spearville are two of the communities that were once served by Aquila.
The vote by all 13,200 members of the co-op will end the schism, Imgarten said, with all customer rates falling under the same regulatory standards.
Currently, the split "requires the cooperative to invest significant time and staff resources to keep separate tariffs and financial reports for both the native system and MKEC system," Laws wrote.
MKEC, or the Mid Kansas Electrical Cooperative, was the joint corporation formed in order to purchase and disburse elements of the defunct Aquila company.
Imgarten said the cooperative does not have a rate increase planned, and had not increased power rates for its deregulated customers in the 19 years between 1992 and 2011, excluding certain industry-related cases.
"To be frank, all of our employees here are members too, and they have to pay the same rates. We don't want to see a rate increase, either," Imgarten said.
"We're just trying to keep the decisions here in Dodge and in southwest Kansas rather than in Topeka," she said.
Victory officials and publications on the issue use the term "self-regulation" rather than "deregulation." While the two are similar, Imgarten said, Victory will still be regulated by federal agencies like the EPA and OSHA.
And "If members have a problem they can go to their board member or contest it to the KCC," Imgarten said. "They won't be out of the picture, but we won't have to clear everything with them."
As part of the state law that allows cooperative power companies to deregulate, it also requires those companies seeking deregulation to send members opposing viewpoints.
In a letter from the Citizens' Utility Ratepayer Board, or CURB, a state-funded utility customer advocate, it warned Victory members that without oversight by KCC and its organization, Victory trustees could raise rates with fewer hurdles.
"It leaves them with virtually no protection more than who they can influence on their board," said Niki Christopher, one of three CURB attorneys in an agency of six total employees.
CURB and the KCC employ 170 specialists, she said. By deregulating, customers will lose the benefit of their expertise, scrutiny and advocacy against rate increases.
Most of the disagreements between utilities seeking rate increases and CURB is on the issue of profit margins, Christopher said.
According to the 2013 financial disclosure, Victory had a margin of 7 percent in that year. The majority of expenditures were for the cost of power at 73 percent of the total budget.
The purpose of CURB is not to create "outstanding victories," Christopher said, but to provide a consistent pressure and subject-matter expertise that are difficult for regular members of the cooperative to achieve.
"The reality is that the number of people who actually attend board meetings and stay informed on what's going on inside the finances of their co-op is very few," Christopher said.
Imgarten said she did not have access to voter turnout numbers for the last contested board election, as it is handled by a hired firm.
While it is true each cooperative is governed by an elected Board of Trustees, by-laws are usually written in a way that provides stability on the board. It can take several years of consistent advocacy by members to create significant turnover on the board, Christopher said.
Victory is governed by 12 elected trustees, three from Dodge City and nine from outside the city. Each year, one-third of the board, including one of the Dodge City seats, is up for election. Members serve three-year terms.
One cooperative, once deregulation had been approved, changed the rules governing eligibility for trustees so that potential candidates had to be approved by the current board, Christopher said.
"We point out that ratepayers, if they were upset, had to go through current board members to get their candidates on the slate, and then had to go through three election cycles to get the board replaced."
The by-laws of the cooperative will continue to protect Victory customers from undue rate increases, Laws wrote, by requiring timely disclosure and public access to meetings.
If deregulation is approved by Victory customers, the members could always vote to re-enter a regulatory arrangement with the KCC, though, as Laws said, this had never been done since the law enabling deregulation was passed in 1992.
Also, Victory has no plans to end the "Cold Weather Rule," a mandate by the KCC that prevents utilities from disconnecting service for nonpayment when the temperature is low, Laws wrote.
"Victory will maintain this important protection for residential customers under self regulation per Victory’s rules and regulations," Law wrote. "No changes have been proposed."