In rare step, AG asks state regulators to deny Kentucky Power rate request outright
Kentucky Attorney General Russell Coleman says state regulators should deny a proposed 12.3% Kentucky Power rate increase that he says is good for shareholders and bad for ratepayers.
The attorney general’s office called on the Kentucky Public Service Commission to take an “extremely rare” step and reject the energy provider’s proposed rate increase outright. There is no evidence the company, which serves about 165,000 customers in 20 of Kentucky’s easternmost counties, would suffer harm if it fails to secure the rate increase, Coleman’s office said.
“For generations, outsiders have taken advantage of Eastern Kentucky in attempts to sap its resources and drain families’ money,” Coleman said in a statement Tuesday afternoon. “It’s my duty to promote affordable, reliable energy in Kentucky, and another rate increase for Kentucky Power won’t advance that goal. I hope the Public Service Commission joins me on the side of Kentucky families and holds Kentucky Power accountable.”
In a post-hearing brief the office filed in Kentucky Power’s PSC rate case Tuesday, lawyers for the state chastised the company for repeatedly burdening its ratepayers with increases despite it turning a profit and its parent company American Electric Power Co. Inc. posting record earnings.
Public comments the PSC heard during meetings in Pikeville, Hazard and Ashland over the past two months proves ratepayers cannot survive more rate increases, the attorney general’s office says.
“Those accounts included examples of individuals who desperately want to live in Eastern Kentucky, but who are considering leaving based simply on the cost of electric service in the area,” the brief reads. “This is unacceptable.”
The investor-owned utility plays an outsized role in determining the future quality of life in some of the commonwealth’s poorest regions, the attorney general’s office said.
“If AEP wants to continue to operate in this service territory, then it must share in the good and the bad, the risk and the reward, and not solely burden the ratepayers with the problems of the area,” the brief added. “What is Kentucky Power’s plan to contribute to the economic viability of its service territory? It does not seem to have one. It regularly seeks double-digit rate increases. And it gives no indication it plans to stop doing so.”
Kentucky Power officials said they were aware of the attorney general’s brief and such filings are a normal part of the PSC’s evidence-gathering process. A spokesperson for the company said the administrative panel that regulates the state’s utilities “will consider the full record including testimony evidence and public comments before issuing a final decision.”
The company has submitted evidence the rate increase it is asking for is necessary to recoup rising operational and infrastructure improvement costs and make up for a shrinking customer base in Eastern Kentucky. The hikes are essential to maintain service reliability, recover investments and offset its losses, it claims.
“We recognize many customers are facing real financial pressure and we take those concerns seriously. Kentucky Power’s responsibility is to provide safe reliable electric service across a large mountainous service territory that can be difficult and costly to maintain especially during severe weather.”
History of rate increases
In 2020, Kentucky Power sought a 13.6% increase of $70.1 million and was granted a 10.2% increase of $52.4 million. Three years later, the company went back to the PSC for a 13.6% increase that would generate nearly $94 million. The company appealed the commission’s much lower $60 million increase the following year, yielding a $74.2 million 10.7% increase.
By 2021, the PSC had launched an investigation of the company out of concern about “the future of Kentucky Power as a utility and about the customers it serves in Eastern Kentucky.”
Last year, the company successfully added the first ever securitization surcharge to its customer’s bills to cover the cost of retiring a coal-fired power plant in Louisa and reversed a prior PSC order that would have forced it to divest in a West Virginia coal plant more than 200 miles away, adding yet another bump to ratepayer’s bills.
In its latest case, Kentucky Power first sought a 14.9% increase but reached a settlement with several interveners to lower its increase to 12.3% spread out over the next three years. Last week, the utility asked for the PSC’s permission to begin charging the higher rates before the regulator has decided.
That would mean an additional $26.40 over current rates the average residential customer would be paying by 2028, according to the settlement agreement. The company would start out with an 8.2%, or $17.58, rate hike this year using 1,210 monthly kilowatt-hours, followed by a little less than $2 more in 2027 and roughly an extra $7 in 2028.
The tiered rate structure the company proposed in its settlement deserves scrutiny, Coleman’s office added Tuesday. High usage in the winter is a common problem in poorly insulated homes that dominate Appalachian Kentucky. Wealthier customers with larger homes would get a break on their monthly bills at the expense of low-income households, he said.
A better approach would be to help ratepayers with high seasonal usage to participate in budget billing plans that smooth out their bills over the course of a year, the office said.
Lawyers for the state also said Kentucky Power needs to end its use of demand-side management programs that encourage consumers to implement energy savings measures. Those programs offer at-home audits and consumer-tailored efficiency improvements. Commercial customers are also offered incentives to participate.
The company is allowed to add a DSM surcharge to customer bills to fund those programs, but it only began adding the surcharge and offering the programs again in 2023 after the PSC halted the practice in 2018 over concerns related to poor economic conditions and excess load growth. The attorney general’s office said the programs are beneficial for those who opt in, but they drive up costs for nonparticipating ratepayers.
While those “costs may be relatively small, the company should be required to eliminate every non-essential cost,” the office contends.
A Kentucky Power spokesperson said the company is “disappointed” in Coleman’s stance because it undermines helpful assistance programs for those who may be struggling to pay their bills.
Coleman’s filing “ultimately attempts to undercut the Company’s ability to provide safe and reliable service to our customers,” said Sarah Nusbaum, a corporate communications manager for the company, in an email to the Herald-Leader.
The attorney general’s office called on the commission to order an independent management audit of the company to determine how the company can improve its service and rates. If the commission approves a rate increase, it should be much lower than Kentucky Power’s request.
“Some of the high costs experienced by ratepayers are likely the result of Kentucky Power’s poor decisionmaking,” the office said. “ If AEP believes the territory is not sufficient for it to achieve its profit goal, then perhaps it is time to let someone else provide the people of Eastern Kentucky with electric service.”
This story was originally published February 3, 2026 at 5:17 PM.
