Kentucky Utilities' rates increasing $7 a month for average customer

It will cost more for Kentucky Utility's customers to keep the lights on, but the electric company is getting a smaller rate hike than it requested.

The state Public Service Commission on Friday approved an adjustment that means the average residential customer — a household that uses 1,230 kilowatt hours a month — will see an increase of $7 a month. Louisville Gas & Electric bills will go up by the same amount.

The PSC also said that, because of numerous complaints, it will select a consultant to audit the utilities' customer service functions, and pass the bill for the audit on to the utilities.

In January, the companies asked the PSC for permission to raise rates by $11.85 for the average customer.

The adjustment approved Friday was agreed to by the two utilities and most of the parties to the rate case. The state attorney general's office, which advocates on behalf of residential customers, did not agree.

The PSC said it accepted the partial settlement because it will "result in a lower rate increase than justified by our traditional rate-making case."

The attorney general's office said it was disappointed in the decision but had not decided whether to appeal.

"We have from the beginning of this process expressed concern that LG&E and KU were asking for rate increases ... while they were being sold," said Allison Martin, a spokeswoman for Attorney General Jack Conway, the Democratic nominee in Kentucky's U.S. Senate race. "We have always felt that the ... buyer would be the correct entity asking for a rate increase."

Four months after the rate increase request was filed, E.ON U.S., the parent company for the utilities, announced that it intended to sell them to PPL Corp. in Pennsylvania. The sale also must be approved by the PSC.

The rate changes approved Friday apply to base rates. They do not affect other portions of the bill, such as fuel cost adjustments and environmental charges, that fluctuate.

LG&E gas customers will see a $3 bump on the average bill, but that does not include the cost of natural gas itself.

Among other things, the increases allow the electric utilities to recover the cost of repairs caused by a windstorm in September 2008 and an ice storm in January 2009.

Nine parties to the case agreed with the settlement. They included the federal Department of Defense, the American Association of Retired Persons, The Kroger Co. and Community Action for Lexington-Fayette, Bourbon, Harrison and Nicholas Counties, Inc.

"No one wants to see an increase in rates; it's especially not good for low-income people," said Charlie Lanter, manager for program development for Community Action. "But we realize that KU's costs are increasing."

Noting that the PSC said the settlement is a better deal for utility customers than the agency itself would have offered, Lanter called the outcome "the best possible scenario."

The settlement includes several concessions that will help low-income customers, he said. Among other things, the utilities will continue for at least two years to put matching shareholder funds into programs to help the poor, and waive late fees in cases in which Community Action steps in to pay a bill.

The utilities also agreed to broaden the incentives offered to commercial customers who replace old equipment with new, more efficient equipment.

Chip Keeling, a spokesman for the utilities, called the settlement "fair, just and reasonable."

"Each side took concessions in the end and we feel this is a fair outcome," he said.

On the PSC-ordered audit, Keeling said the company prides itself on customer service, but "appreciates any input from PSC auditors."

The rate case became involved in state politics earlier this year.

Lt. Gov. Dan Mongiardo, who lost the May 18 U.S. Senate primary to Conway, filed a complaint with the Executive Branch Ethics Commission, saying it was wrong for Conway to take campaign contributions from employees of the utilities while he was supposed to be opposing their rate requests.

The ethics commission dismissed the complaint earlier this month, saying the matter did not fall under its jurisdiction. Martin, the Conway spokeswoman, said the attorney general has saved consumers $100 million in avoided rate increases since taking office in January 2008.