Westar, Great Plains says merger could save customers $200M annually

Dive Brief:

Westar Energy and Great Plains Energy, which owns Kansas City Power & Light, have asked state regulators to approve a merger of the two utilities that they say would eventually save customers $200 million a year.
The Topeka Capital-Journal reports the utilities have filed a formal application with the Kansas Corporation Commission, predicting pre-tax savings and efficiencies of $65 million in the first year and rising thereafter.
Earlier this year, staff from the Missouri Public Service Commission pushed for oversight over the merger, citing an agreement made 15 years ago during its acquisition of Aquila Inc.

Dive Insight:

The $8.6 billion deal is the largest utility merger announced this year, and the latest in a trend of consolidations as power providers seek ways to stabilize revenues.

The Topeka Capital-Journal digs into the merger application presented to state regulators last week, noting that first-year savings to customers will largely offset transaction costs but annual benefits will rapidly rise.

Westar and Great Plains say they expect first-year savings of $65 million, but also transactions costs of $60 million spread through 2020. But the utilities said told the KCC that the savings “are expected to increase to nearly $200 million annually in the third full year after closing and thereafter, with a reasonable opportunity to achieve even greater savings."

According to the newspaper, savings will arise from four areas, including generation and customer service efficiencies.

Based in Topeka, Westar serves about 700,000 customers across eastern Kansas and owns more than 7 GW of generation. The deal would give Great Plains, which owns Kansas City Power & Light, more than 1.5 million customers in Kansas and Missouri and over 13 GW of total generation.

Westar operates 7.2 GW of electricity generation, with a projected 2017 capacity mix of 41% coal, 30% natural gas, 22% renewables (mostly wind), and 7% nuclear. Great Plains operates 6.4 GW of generation through its Kansas City Power & Light subsidiary. In 2015, it generated 74% of its electricity from coal, 16% from nuclear, 8% from wind, and 1% each from hydro power and combined gas and oil.

In their announcement, Great Plains said it would need approval from shareholders, the Kansas Corporation Commission, the Federal Energy Regulatory Commission and Nuclear Regulatory Commission. The company did not mention Missouri regulators, and said it expects the deal to close in the spring of 2017.