The state Public Service Commission on Thursday approved a settlement in Kentucky Utilities' request to raise the environmental surcharges on monthly electrical bills. The approved settlement will mean a smaller increase for customers.
Under the approved plan, the company has agreed to delay certain environmental projects at its E.W. Brown power plant, reducing the price increase for customers. The other companies and organizations involved in the case, such as the state attorney general's office, which represents consumers, agreed to the settlement before it was submitted to the PSC for its review.
"This is one of those issues in which the PSC has limited discretion given the way the state statute is," said spokesman Andrew Melnykovych. "If what's presented to the PSC is deemed to be a reasonable least-cost compliance plan, the PSC is essentially obligated to approve it."
Under the approved settlement, the monthly environmental surcharge will increase 0.89 percent starting in 2012 and be 9.65 percent higher by 2016, according to KU. For a residential customer using 1,000 kilowatt hours a month, the monthly increase would be 69 cents in 2012, rising to $7.47 by 2016. That's down from KU's initial proposal, which called for a monthly increase of $1.13 in 2012 up to $9.46 in 2016.
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Behind the reduction is the decision to forgo certain improvements at the Brown plant, on the banks of Herrington Lake. The utility had planned to install systems to better control particulates, part of a series of changes at multiple plants to comply with revised federal environmental regulations. But the federal rule regarding those systems has been delayed until 2013.
"We've agreed to wait until we get a clearer picture of that final rule before we do anything," KU spokeswoman Chris Whelan recently told the Herald-Leader, emphasizing that KU sees the move as simply a deferral of the $225 million in costs that would have been incurred.
The utility still will be converting a wet storage facility at Brown to a dry landfill and making some minor modifications, she said. And KU will be spending about $712 million on improvements at its plant north of Ghent along the Ohio River.
"We are glad to have the commission's approval on our environmental improvement plans," Lonnie Bellar, vice president of state rates and regulatory, said in a statement. "The parties to the case worked hard to reach the unanimous settlement agreement, and now we can focus on the large-scale projects we have ahead of us."
Beyond those, KU has asked in a different case for permission to spend as much as $800 million to build natural gas-fired power generators to replace older coal-fired units as part of complying with the revised environmental rules. KU expects to eventually ask for a 4 percent increase in rates to pay for the units. That case is pending before the commission.
As part of the settlement, KU also has agreed to donate an additional $250,000 from shareholder profits to its home energy assistance programs. Of that amount, $125,000 will be donated during this winter heating season; the remainder will be donated next year. That amount is on top of the roughly $120,000 KU donates from shareholder money annually, Whelan said.