KU, LG&E customers will pay less for their home power bill. Here’s why.

Residential customers of Kentucky Utilities and Louisville Gas & Electric will see their average monthly bills decrease about 6 percent because of a reduction in federal corporate income taxes.

The Kentucky Public Service Commission said in a news release that LG&E residential gas customers would see a 4.5 percent reduction in the base rate portion (not including the commodity cost of natural gas) of their bills, also.

The PSC order issued Tuesday modified a settlement reached between the two utilities and the Kentucky Industrial Utility Customers Inc., which had filed a case seeking a tax reduction, and the Kentucky attorney general’s office, which was also a party to the case.

The settlement called for a total revenue decrease of $176.9 million, but the reduction ordered by the PSC is $203.8 million instead because of modifications the PSC made to the way the tax reduction was calculated.

The federal tax law enacted in December reduced the corporate income tax rate from 35 percent to 21 percent beginning in 2018, reducing the tax burden on for-profit, investor-owned utilities. That reduced tax burden reduces the amount that utilities need in order to offer their investors a reasonable rate of return.

The industrial utility users’ group filed cases against LG&E, KU, Duke Energy Kentucky and Kentucky Power Co., seeking reductions in rates to reflect the lower corporate taxes.

The KU and LG&E revenue reduction will be reflected in a credit that will appear on KU and LG&E customer bills. The reduction will reflect both ongoing tax savings and an additional credit for the first three months of this year. It will take effect April 1, 2018 through April 30, 2019.

The credit expires on April 30, 2019 because both utilities have said they will file rate cases that reflect the changes in the federal corporate income tax. If rates don’t change, the reduction would remain in place but be recalculated.

Cheryl Truman: 859-231-3202, @CherylTruman