Kentucky PSC issues order in Kentucky Power rate case

The Kentucky Public Service Commission (PSC) recently issued an order in Kentucky Power’s rate case, approving the first base rate increase to the residential class since 2015.

In July 2020, Kentucky Power had filed an application seeking an annual increase in its electric revenues of $70.1 million, and the PSC approved a final base revenue increase of $52.4 million.

Kentucky Power also asked for installation of advanced metering infrastructure (AMI), a grid modernization rider, an electric vehicle charging provision, and changes to the company’s net metering tariff, as well as a number of other items.

The PSC changed the amortization rate of the excess unprotected accumulated deferred income tax from 18 years to three years in order to mitigate rate impact.

Kentucky Power will be required to provide a review of rates after three years, and the company will also be required to file a general base rate case for rates as of Jan. 1, 2024.

“Our team has been reviewing the 134 page order and it seems to be a balanced compromise when you consider all of the factors in this case,” said Cynthia Wiseman, vice president of external affairs and customer service for Kentucky Power. “It also provides helpful guidance on how to move forward with some key items such as our Advanced Metering Infrastructure (AMI) proposal.”

Kentucky Power was also awarded a return on equity of 9.3 percent, although the utility had originally asked for 10 percent.

The new order also means that 100 percent of Off-System Sales (OSS) margins will be apportioned to ratepayers, a dramatic difference than the current 25 percent of revenues from OSS that benefit shareholders.

The PSC denied a Certificate of Public Convenience and Necessity for an AMI system and a related grid modernization rider to recover annual costs to install the AMI system (which is estimated to be around $35 million), both requested by Kentucky Power.

The PSC said it denied specific motions because it wants Kentucky Power to address issues that adversely affect Kentucky Power customers, many which have come to light during the COVID-19 pandemic, including taking a look at late fee rules during an emergency. The commission directed the utility to stop all late charges, but it did authorize an increase of monthly customer charges from $14 to $17.50, as well as an energy charge of 0.11031/kWh.

The PSC is not yet making a decision on Kentucky Power’s proposed changes to the net metering tariff because it said the utility has not yet proven that an increase in rates is “fair, just and reasonable.”

“Kentucky Power proposed a rate, but did not provide sufficient evidence to support it,” the commission said in a statement. “As this is the first case to come before the PSC since the law changed, the PSC will be working with a consultant to ensure there is sufficient evidence to support changes to the existing tariff.”

In 2019, the Kentucky legislature removed the one-to-one rate for net metering, but left it up to each utility to come up with a replacement value.

According to Wiseman, “We proposed a fair rate design for net metering customers in order to comply with the new Kentucky law resulting from Senate Bill 100, an act related to net metering, which took effect on Jan. 1, 2020. The Kentucky Public Service Commission chose to defer its decision on net metering but should issue a decision by May 14, 2021.”