Kentucky Power’s gas-fired Big Sandy power plant in Lawrence County. (Creative Commons photo)
The Kentucky Public Service Commission (PSC) is hosting multiple public meetings the next few weeks to receive input on electric utility Kentucky Power’s request to raise utility bills for the utility’s average residential customer by about 18%.
Kentucky Power, an investor-owned utility serving about 163,000 customers in 20 Eastern Kentucky counties, already has the highest average monthly utility bills in the state at $187.56 according to a state report published this summer.
But Kentucky Power president and chief operating officer Cynthia Wiseman in written testimony says the utility needs higher rates to deal with “historic” economic decline and the loss of major electricity customers in its service area. Between 2008 and 2022, according to the utility’s application, Kentucky Power’s customer count fell by 11,482.
In the utility’s application to raise rates she said the closure of large utility customers, such as AK Steel and Our Lady of Bellefonte in Ashland, created job losses that may have led to more customers leaving its service area.
“These declines unfortunately follow a now long-term trend in the area and include a dramatic loss of coal mining jobs that began in the early 2000s,” Wiseman said in her written testimony. “These significant declines result in equally significant lost revenues for the Company. It is critical to Kentucky Power’s financial integrity to act now to address those changes.”
The utility also serves some of the most economically-challenged counties in Kentucky; 11 of the utility’s 20 counties in Eastern Kentucky had the highest unemployment rates in the state as of earlier this year.
What is Kentucky Power proposing exactly?
According to the utility’s application, its request to raise rates would bring in an estimated $93.9 million more each year, representing a 13.54% increase in revenue for the utility.
Wiseman said in the utility’s application that it recognizes the “circumstances” its customers face and plans to offset or reduce the financial burden of the rate increase in a few ways.
- Using a new state law passed this year, Kentucky Power is requesting the PSC to allow it to “securitize” about $446.7 million of various costs, including storm damage costs and its decommissioning rider. In general terms, securitization allows utilities to bundle costs into a bond to sell, which can potentially mean lower costs to ratepayers by spreading costs over a longer timeframe. That’s compared to traditionally recouping such costs through electricity rate increases.
- Kentucky Power wants to stop asking customers to pay a decommissioning rider — added onto utility bills to cover costs linked to the closure of its coal-firedBig Sandy Generation Station — along with another rider added to bills to cover previous costs at a coal-fired power plant in Indiana. The suspension of the two riders would last until the utility can “securitize” those costs.
- The utility wants to reduce the amount of storm damage costs recouped by customers, not including costs the utility sustained during a February 2021 ice storm and floods during the summer of 2022.
- Kentucky Power also is asking the PSC for a lower “return on equity,” or the rate of profits the utility is allowed to make, than it is “warranted” to ask for it as another way to limit its proposed rate increase.
Among other requests not specifically related to the rate increase, Kentucky Power is asking the PSC to create a new rider on utility bills called the “Distribution Reliability Rider” that would give the utility extra funds to deal with common causes of power outages, specifically equipment failures and trees not in the utility’s right of way.
The utility also wants to build a minimum capacity 10 megawatt solar installation described as a “solar garden.” The power from the project would in part provide a “yearly bill credit” every January to about 11,500 of its customers taking part in federal energy assistance programs.
How to make a comment
The PSC is holding four meetings to receive commentary from the public on Kentucky Power’s rate increase proposal. Those meeting locations and times are:
- Wednesday, Nov. 8, from 5 p.m. to 8 p.m. at the Boyd County Courthouse, 2800 Louisa Road, Catlettsburg.
- Thursday, Nov. 9, from 5 p.m. to 8 p.m. at the Perry County Courthouse, 481 Main Street, Hazard.
- Thursday, Nov. 16, from 5 p.m. to 8 p.m. at the Public Service Commission. 211 Sower Boulevard, Frankfort. This meeting includes a virtual option; directions to participate will be on the PSC’s website before the meeting.
- Monday, Nov. 20, from 5 p.m. to 7 p.m. at the Pike County Courthouse, 146 Main Street, Pikeville.
According to a release, the PSC plans to hold a public hearing on Kentucky Power’s proposal on Tuesday, Nov. 28, at 9 a.m. at its headquarters in Frankfort, where time will be available before the hearing for more public comments. The hearing will be livestreamed on the PSC’s YouTube channel.
Kentuckians can submit a comment on the proposal at any time through the PSC’s website, emailed to [email protected] or mailed to P.O. Box 615, Frankfort, KY, 40602-0615. All comments about the proposal should include the commenter’s name, address and the case number: 2023-00159.
Correction: This story has been updated to reflect Kentucky Power is asking for a higher overall “return on equity” rate than it currently has.
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