Kentucky Power found potential new owner. Here’s what’s promised if sale is approved

Kentucky Power will be under the leadership of Liberty Utilities, if its sale is approved by a state commission.

The utility company, a subsidiary of American Electric Power, provides electricity for 165,000 retail customers in 20 Eastern Kentucky counties.

The purchase price is $2.8 billion, which includes $1.2 billion in debt.

Liberty leaders have promised to:

• Decrease residential customer bills by about 15% when the transaction closes.
• Create a $40 million fund to help offset unpredictable fuel rates, providing a credit of $170 to $250 per customer.
• Forgo a rate, which would decrease residential customers’ bills by $84 to $108 per year.

Liberty officials said also they would keep all 315 Kentucky Power employees and hire an additional 100 employees.

Liberty and Kentucky Power are seeking approval from Kentucky Public Service Commission.

During testimony in front of PSC last week, Peter Eichler, Liberty’s senior vice president of regulatory strategy and central services, said the utility company’s business strategy is to acquire utilities that have been “less loved,” because that utility’s parent company has larger utilities drawing its attention and focus.

Liberty’s business strategy is to utilize a local model that will create a long-term relationship with its customers and allow them to better understand the needs of the community, he said.

David Swain, the incoming president of Kentucky Power, said the service territory is similar to other Liberty operations: rural, customers are farther apart and more wire per customer.

“Somebody needs to serve those people,” Swain said. “They need electricity…It’s attractive to our company for the reasons I just talked abou. If we can grow it economically, we can help to fix some of the problems that customers are facing. And we’ll do it in spite of those challenges that we have there, and our track record shows us that we can.”

AEP reviewed Kentucky Power’s finances in 2021. Stephan Haynes, AEP’s senior vice president of strategy and transformation, said he believes Liberty will be able to meet the needs of the customers by providing more jobs, and focusing on customer advocacy and localization. He said AEP has other part of its company it wants to invest in.

Liberty’s goal is to have 75% of its utility’s energy come from renewable resources by 2023; it is currently at 63%. It also has a goal to be carbon neutral by 2050. AEP has the same 2050 goal.

Opposition

In Eastern Kentucky, legislators have raised alarms of the future of coal and natural gas if Kentucky Power’s new owners obtain these renewable energy goals.

Sen. Brandon Smith, R-Perry, said at a recent Kentucky Mountain Caucus press conference that the state has a rich history of coal mining and utilizing other natural resources. Eastern Kentucky counties don’t see a role for them in this heavy push for renewables, he said.

The Mountain Caucus members also expressed doubt that Kentucky Power customers would see relief from their high bills. Sen. Robin Webb, D-Boyd, said though she had met with Liberty officials, she had “yet to be convinced or satisfied when it comes to affordability, reliability and sustainability.”

Rep. Angie Hatton, D-Letcher, said during the hearing’s public comment that Kentucky Power’s rates were some of the highest in the poorest areas, and at times electric bills can cost more than rent or a mortgage payment. She wondered if Kentucky Power customers could find a better owner who was more aligned with their history.

Kentucky Attorney General Daniel Cameron opposes the sale of Kentucky Power to Liberty Utilities. He said he believes the proposed sale is unlikely to meet the needs of providing “reliable, reasonably priced electricity,” and is concerned the reduction of rates will be short term.

“If the PSC disagrees with us and approves the sale, I hope it will make whole the thousands of Eastern Kentuckians who for years have struggled with unreasonably high rates and chronic underinvestment in their utility infrastructure,” Cameron said.

Cameron said a portion of the sales price — the $585 million premium — should be returned to customers as a rate credit.

There will not be a deal between AEP and Liberty Utilities if a customer refund was required, Eichler said.

In favor of the sale

Several Eastern Kentucky economic development groups have told the Public Service Commission they were for the acquisition.

Chuck Sexton, One East president and CEO, said Liberty will help with job diversification and creation, which the region needs.

Liberty Utilities previously announced any economic development project committed by AEP for the next two years would go on as planned.

Pike County Judge-executive Ray Jones said during public comment he also supported the sale. He was critical of AEP’s action during the rate increase, lack of economic development and closing of the Big Sandy power plant. Eastern Kentucky needs to “look for a fresh start,” he said.

What’s next?

After a two-day hearing, the Public Service Commission is now deciding whether to approve the acquisition.

Liberty expects to complete the transaction by midyear.