Kentucky Power lowers proposed rate hike after pushback. Some ratepayers say it’s still too much.

‘ … the most expensive to the population that can least afford it’

By: - November 28, 2023 4:50 pm

Bren Martin of Greenup County said she is glad Kentucky Power is offering some concessions but that she hopes the Public Service Commission realizes “many families can not endure any increase.” Martin spoke against the rate increase at a public meeting hosted by the PSC in Boyd County on Nov. 8, 2023. (Screenshot)

Letcher County Judge-Executive Terry Adams walked up to a microphone inside a hearing room in Frankfort Tuesday morning, one of numerous people who had given public comments over the past few weeks to the Kentucky Public Service Commission (PSC). 

Terry Adams (Kentucky County Judge/Executive Association)

The utility regulator over the upcoming days will be questioning Kentucky Power executives and other witnesses about the electric utility’s proposed rate increase. Kentucky Power serves about 163,000 people in 20 Eastern Kentucky counties and has said it needs to raise electricity rates to deal with “historic” economic decline and the loss of major industrial customers in the region. 

Kentucky Power initially asked for a rate increase that would have meant an 18% increase in monthly utility bills for its average residential customer. The investor-owned utility’s residential customers already pay the highest average monthly bill in the state at $187.56 according to a state report published this summer. 

The utility last week reached a settlement with an industry group, a coalition of environmental and public interest groups and other stakeholders to lessen the proposed rate increase to 10.7%, along with making other commitments including expanding its residential energy assistance program. The Kentucky attorney general did not sign onto the settlement but also didn’t oppose it, according to written testimony filed by Kentucky Power. A spokesperson for the Kentucky attorney general in an email said their office “did not endorse the rate increase.” 

Yet Adams, the judge-executive, and other local elected officials and residents who came to the PSC’s public meetings throughout Eastern Kentucky, still strongly oppose the rate increase as a financial burden on communities already facing economic struggles and recovering from a “terrible flood situation.” 

“We’re truly suffering in Eastern Kentucky, and I know there’s a profit margin that has to be made by a company,” Adams said. “But to put that on the backs of people that already can’t pay their bills is not acceptable.” 

The PSC would have to approve the tentative settlement agreement, which some of Kentucky Power’s ratepayers say doesn’t do enough to mitigate the financial burden many in Eastern Kentucky face. 

Kentucky Power’s ‘dire financial circumstances’

In Kentucky Power’s settlement proposal, the utility is not only asking for less money from ratepayers than it originally had sought but also is planning to defer more of the existing fees on utility bills — such as a rider to cover retirement costs of former coal-fired power at its Big Sandy Power Plant —  until those costs can be “securitized.” 

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’s gas-fired Big Sandy power plant in Lawrence County. (Creative Commons photo)

Kentucky Power’s latest rate increase proposal would bring in $74,666,028, a decrease of about $19,269,699 from the original $93,935,727 that the utility was seeking. 

“The Company is well aware that its customers face many of the same financial challenges it faces,” said Kentucky Power Vice President Brian West in written testimony before the commission. “The provisions of the Settlement Agreement balance addressing the Company’s need to address its dire financial circumstances with its desire to minimize the impacts of rate increases on its customers.” 

Along with the decline of coal mining in Eastern Kentucky, the utility has cited the loss of residential and industrial customers, such as AK Steel and Our Lady of Bellefonte hospital in Ashland. The shuttering of those large employers has fueled further job losses leading to more ratepayers leaving its service area. Between 2008 and 2022, according to the utility’s application, Kentucky Power’s customer count fell by 11,482.

Julie Sloat, the CEO of Ohio-based American Electric Power which owns subsidiary Kentucky Power, on a May call with investors said Kentucky Power’s ROE of 2.9% didn’t “reflect a financially healthy utility” and that the issue needed to be “resolved in the consideration of the interest of all stakeholders.” 

Josh Bills

The Mountain Association, a Berea-based economic development nonprofit, was one of the parties that agreed to the rate increase settlement. Josh Bills, a commercial energy specialist with the group, said Kentucky Power is in a “really, really challenging” situation in that many electricity meters have gone “dark.” Residential customers are struggling to pay electricity bills, he said, while also not having the resources to improve energy efficiency of their homes to potentially lower bills. 

“I don’t know if there’s a utility that, you know, comes close to the situation that they’re in, in terms of how expensive it is to their customers and yet how challenged their customers are to keep up,” Bills said. “It’s the most expensive to the population that can least afford it.” 

Kentucky Power serves some of the most economically-challenged counties in the state or nation. Eleven of the utility’s 20 counties in Eastern Kentucky had the 11 highest county-wide unemployment rates in the state as of earlier this year. 

Proposed settlement creates commitments for energy efficiency, assistance programs

Bills and another stakeholder involved with the proposed settlement say commitments that Kentucky Power has made in writing could lead to enhanced efforts to help its customers deal with the burden of utility bills. 

In the proposed settlement, Kentucky Power has agreed to: 

  • Update its demand-side and energy efficiency programs, improve education and communication programs and consider distributed energy resources.
  • Expand its residential energy assistance program, which currently helps 2,700 people per year, to aid an estimated 5,700 people a year. 
  • Dedicate 21% of future energy efficiency programs to low-income ratepayers. 
  • Extend the time period for due bills from 15 days to 21 days. 
  • Create an “optional seasonal tariff” to help ratepayers who have high energy usage.
Andy McDonald

Andy McDonald, vice-chair of the solar energy advocacy group Kentucky Solar Energy Society that was also a party to the settlement, said improving access to energy efficiency programs is key because housing stock in Eastern Kentucky is oftentimes energy inefficient, leading to higher energy usage and higher utility bills. 

He said older homes and mobile homes in Kentucky Power’s service area need weatherization work, such as installing insulation, to use less energy. The hope is that the agreement will help ratepayers now and in the future by increasing the energy efficiency of their homes and their access to home-based energy generation such as rooftop solar, he said.

“We want them to really invest in efficiency so that they don’t need to build a new power plant and then have to put that cost on customers,” McDonald said. 

Kentucky Power is currently seeking to purchase at least 875 megawatts of power generation potentially made up of “thermal” power sources, meaning coal or natural gas, and renewable energy sources such as solar and wind power. The PSC earlier this year threatened to fine Kentucky Power for not having enough power supply ahead of a winter storm in 2022. 

Lessened rate increase still not enough for some ratepayers

Adams, the Letcher County judge-executive, along with other Kentucky Power customers who gave public comments to the commission specifically pointed to the harm a rate increase could have on those with fixed incomes. 

Bren Martin, a member of the nonprofit, progressive grassroots organization Kentuckians for the Commonwealth who lives in Greenup County, gave testimony to the commission earlier this month at the Boyd County courthouse. She said “lives at risk were real” with this rate increase. Kentuckians for the Commonwealth is one of the parties to the proposed settlement. 

Martin in an email said while she was glad Kentucky Power was offering some concessions, she hoped the PSC would realize “many families can not endure any increase.” 

“They should not have to grovel for survival, especially people who have worked hard but might be riddled with mountains of medical expenses, high rent and more,” Martin said in her email. 

Ronda Hansen, 70, says higher power bills could force her to curb spending on medicine. She worries about “the person who has less income than I do.”

For at least one ratepayer living on a fixed income, any rate increase is too much. Ronda Hansen, 70, lives with her husband near Ashland. Health problems including diabetes and heart issues have kept her from working, and her husband retired from years of being a postal worker, she told the Kentucky Lantern in a phone interview. 

She said their combined income is too high to qualify for programs geared to low-income households. But she still has expenses to manage, ranging from her utility bill for her older home to keeping up maintenance on her 2007 Chrysler Caravan. She worries dealing with another rate increase could mean choosing to curb her budget for medicine, which she says averages $150 a month. 

She realizes that her older home isn’t energy efficient, but she worries who will pay for upgrades to improve that. 

“Have they really thought about the person who has less income than I do, much less than I do?” Hansen said. “I feel like they almost don’t give a rip about the common person.” 

This story was updated to clarify the Kentucky attorney general did not sign onto Kentucky Power’s proposed settlement agreement. 

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Liam Niemeyer
Liam Niemeyer

Liam covers government and policy in Kentucky and its impacts throughout the Commonwealth for the Kentucky Lantern. He most recently spent four years reporting award-winning stories for WKMS Public Radio in Murray.

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