Kentucky Public Service Commission cuts proposed rate increase, surcharges through 2018

A proposed base rate increase sought by Kentucky Power Co., as well as demand-side management programs and customer surcharges have been countered by the Kentucky Public Service Commission (KPSC).

The KPSC effectively cut four-fifths of the base rate increase sought by the company and instituted two orders that will actually result in residential customers paying an average $6 less per month.

Further, they slashed rates for all other classes of customers as well and discontinued almost all of Kentucky Power’s demand-side management programs. The only one of those programs that survived is a program to help low-income residential ratepayers reduce energy consumption. Such programs are funded by surcharges on residential customers, so with their elimination, residential ratepayers will be receiving monthly credits of $1.48 as the company returns funds already collected. The KPSC found that it could no longer justify expenditures made on the programs, following a February 2017 investigation.

Kentucky Power had originally sought to increase its annual revenue by $60.4 million–an 11 percent increase. The KPSC has thrown that out the window, granting an increase from base rates of $12.35 million instead, cutting measures even further than the amount agreed upon during a party settlement agreement of $31.8 million. The $19.45 million additional shave of funds is, according to the KPSC, largely due to federal action.

With the effects of a federal corporate income tax rate cut now having gone into effect, the company essentially gained $13.9 million. The rest of the cut funds stem from the recovery of purchased power costs and other adjustments.

Amidst all of this, the KPSC also reduced to 9.7 percent the authorized return on investment for company shareholders. It allowed Kentucky Power to defer $50 million in expenses for power purchasing from another company in Indiana and accepted a provision to increase monthly service charges for customers. However, it eliminated granting of a separate rate for schools and rejected a provision of Kentucky Power’s settlement that had asked for residential customers to continue paying a monthly charge for economic development efforts in the company’s service territory.