KY Power pushes back, requests rehearing after state slashes rate hike in half
The Eastern Kentucky utility company that came under fire last year for proposing a nearly 15% rate increase on its Appalachian customers wants state regulators in Frankfort to reconsider portions of their order cutting that hike in half.
Kentucky Power filed a motion for rehearing March 20 in the controversial base rate increase case the Public Service Commission ruled on in late February, suggesting regulators should take another look at “unintended consequences” affecting customers and the company’s financial health.
The company insists even if the three-member utility commission grants its motion for a reahearing and adjusts the Feb. 28 order, the proposal can be adopted with no material impact to customers’ bills because Kentucky Power is willing to defer up to $40 million in future tax liabilities over the next two years.
“The Company is acutely aware of the unique challenges its customers face,” the company told the PSC.
Kentucky Power serves 20 of Kentucky’s easternmost counties, one of the poorest regions in America due to its reliance on a fast-dwindling coal economy and geographic isolation. The company has said it needs to recoup the cost of infrastructure improvements its already made and rebalance rates as the region’s population declines — a calculation leaving fewer ratepayers left carrying a greater share of the utility’s maintenance.
In February, the PSC overruled a settlement agreement Kentucky Power had already signed off on lowering its initial 15% proposed rate increase to 12% over three years. Instead, the commission granted a much smaller 6% residential base rate increase, leaving average customers paying an additional $10.76 more this year and reducing the company’s new revenue by more than $40 million.
That order reduced the company’s operating and maintenance expenses by about $15 million annually and deprived it from recovering about $3 million annually, the cost of financing past vegetation management expenses and nearly $17 million in such expenditures already incurred, according to the company’s motion.
Power companies have a legal obligation to trim trees and control plant growth around their above-ground power grid to prevent outages, reduce fire hazards and ensure public safety. Improvements Kentucky Power has already made to its routine maintenance was a key part of its initial base rate increase proposal. But the commission told the company it couldn’t include additional vegetation management outside a power line’s right-of-way to its base rates and should instead be treated as operating expenses.
The company called those actions “unreasonable and unlawful,” arguing customers would be paying more for the company to perform less vegetation management by eliminating more than 100 Eastern Kentucky contractor jobs. It would harm the company economically by depriving it of the right to recover significant costs its already incurred and leaves questions unanswered about how the company should treat inside-right-of-way vegetation management costs, Kentucky Power claims.
Company officials also took issue with the commission’s order denying unspecified compensation and transmission expenses.
The Kentucky Solar Industries Association Inc. filed a response Tuesday afternoon in support of the power company’s motion for rehearing.
