Rate Case Roundup: Kentucky

The Kentucky Public Service Commission approved as modified a proffered stipulation pursuant to which an electric utility, Kentucky Power Company, may implement a base rate hike of $12.35 million. The final amount authorized stands in stark contrast to the $65.39 million in additional revenues originally sought by the company. It also marks a significant reduction from the rate terms negotiated by the settling parties, which provided for an increase of $19.45 million.

The higher revenue requirement established for the utility notwithstanding, the commission highlighted the fact that because of a separate commission order issued in another docket, which had the effect of terminating almost all of the utility’s demand-side management (DSM) programs, the net impact will be an overall reduction in bills for the typical residential customer. The commission stated that the record demonstrated that Kentucky Power currently has excess generating capacity. Because it is likely to continue to have surplus capacity well into the future, the commission determined that there is no need for conservation and other DSM offerings at the present time.

Observing that such programs cost ratepayers about $6 million a year, the commission ruled that it would not be prudent to allow the utility to continue to recover such costs from customers when there is no longer a need for the programs. However, the commission stressed that those DSM measures made available to low-income customers would remain in place.

The commission stated that the net effect of elimination of the DSM surcharge from customer bills and the institution of refunds for previously overcollected DSM funds would be a small reduction in an average residential customer’s monthly bill, all other factors being the same. Also contributing to that net decrease was the commission’s further modification of the tendered rate agreement to eliminate another rider as well, that one earmarked for economic development programs.

While the settling parties had agreed to lower from 15 cents per month to 10 cents a month the fee imposed on residential customers for economic development efforts within the utility’s service area, the commission chose to discontinue the economic development adder per se and reallocate those monies to lowincome assistance plans. As a result, residential ratepayers will see the low-income assistance surcharge go from 15 cents per month to 30 cents per month.

n addition to amending the stipulation with respect to the DSM and economic development riders, the commission also negated a term which memorialized the parties’ consent to continuation of a special rate offered to schools. The separate rate had been made available to 30 schools on a trial basis, and the negotiating parties had concurred that the program should be extended and the pilot made permanent. But the commission disagreed, finding that the discounted rate could not be costjustified given the usage characteristics of schools. The commission posited that the more favorable rate for schools resulted in other customers being unfairly forced to subsidize the program.

The commission made changes to the ROE terms contained in the rate agreement as well. The commission found that Kentucky Power should earn an ROE no greater than 9.70%. The parties had stipulated to a slightly higher 9.75%.

On the matter of customer charges, however, the commission adopted the settlement provisions as set forth in the agreement. As such, the residential charge will rise from its current level of $11 per month to $14 a month. That represents a significant compromise on the part of the utility, which first suggested that the residential customer charge be increased to $17.50 a month, a rise of nearly 60%. Re Kentucky Power Co., Case No. 2017-00179, Jan. 18, 2018 (Ky.P.S.C.).