Commentary

Improving efficiency would lower Kentucky Power bills and demand, say negotiators

Rate increase request and proposed settlement are still open for comment

December 7, 2023 5:30 am

Kentucky Power serves 163,000 customers. On average only 67 of them a year have received weatherization home improvements through the investor-owned utility in recent years. Over 8,100 customers were disconnected for non-payment in 2021 alone. (Photo by Scott Olson/Getty Images)

Kentucky Power, a utility serving 20 of Kentucky’s poorest counties, has asked for an increase in electricity rates for homeowners, renters and small businesses — the fourth in eight years.

The increase, currently in a settlement agreement under review by the Kentucky Public Service Commission (PSC), could bring in $74 million more a year to Kentucky Power from its 163,000 customers, including residents, businesses and industrial users. That’s a significant amount of money out of the pockets of those who in many cases are already struggling to pay their electric bills.

At Mountain Association, the community economic development nonprofit where I work, we understand rising costs and recurring extreme weather, along with the region’s faltering economy, all take a toll on Kentucky Power and its customers. We, along with Appalachian Citizens’ Law Center, Kentuckians for the Commonwealth and the Kentucky Solar Energy Society recently worked closely with Kentucky Power to discuss some of these issues at length, and agreed to a settlement pending in the case that will both reduce the overall rate increase and increase efforts to assist customers with low and fixed incomes.

Kentucky Power says it needs to purchase more energy and capacity resources with some of the $74 million. At the same time, for the past four years, only 67 customers per year on average have received weatherization home improvements through Kentucky Power. And the utility disconnected over 8,100 customers for non-payment in 2021 alone. Without addressing the root cause of those high bills — poorly insulated and inefficient homes — Kentucky Power can’t hope to make a dent in decreasing the amount of energy it needs to provide customers.

We are happy to report that through our conversations, Kentucky Power has committed to more than doubling shareholder company funds that go to those most challenged to help pay their high winter electric bills. But the real work still lies ahead in collaborating with Kentucky Power to develop energy saving programs to help customers lower their electricity needs and bills.

These programs can make a real difference for both customers and utility companies. Ouachita Electric Cooperative, a utility in Kansas, for example, invested nearly $3 million into their customers’ homes, completing 700 home efficiency improvement projects and adding solar. This has reduced its summer peak for energy by about 30% — and resulted in a 4% rate decrease for their member-owners. 

Programs that help people make upgrades in this way are a perfect complement to standard rebate and incentive programs. For many low-income families incentives alone aren’t enough to allow them to invest in energy improvements because they simply cannot afford thousands of dollars in upfront costs for things like new HVAC equipment, attic or duct insulation, or air sealing. Ouachita Electric Cooperative uses a Pay As You Save (PAYS) model, as do other utilities around the country, through which utilities pay for improvements in customers’ homes and recover those upfront costs via a fixed charge on the customer’s utility bill. The fixed monthly charge is less than the average monthly energy bill savings, creating a net savings for the customer from day one. 

Those enrolled get a more comfortable home and a lower electric bill at the same time. Additionally, energy efficiency programs provide more economic benefits and jobs to the region than if Kentucky Power were to purchase more energy from outside Kentucky — not to mention the significant environmental benefits. We are encouraged by Kentucky Power’s commitment to serving more people with its energy efficiency programs, and look forward to collaborating to find more durable ways to help customers meet their energy needs and control costs.

The Kentucky PSC will decide on Kentucky Power’s rate request and the settlement agreement, and public comment is still being accepted. You can submit your thoughts on the rate request, and on the proposed settlement to which Mountain Association and the other groups mentioned above are parties, via Kentuckians for Energy Democracy at k4ed.org/kpc.

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