Complete documentation of the filing is available on the PSC's website. Hearings will also be available through live streaming on this website. The PSC held four public meetings regarding the case and invites public comments through its website.
Since Kentucky Power's last rate review in 2020, our service area has experienced several significant natural events, including a devastating windstorm, an ice storm and historic flooding. We have seen a notable population decline in our service territory and the loss of several large commercial and industrial customers.
The past few years have been challenging for eastern Kentucky. That's why we are continually working hard and taking meaningful steps to provide reliable electric service for the best rates possible.
How will the rate review impact customers?
The Public Service Commission of Kentucky is conducting an ongoing review of Kentucky Power’s rate proposal. Any rate changes approved by the PSC will not likely take effect until early 2024.
We are sensitive to the hardships a rate increase can create for our customers, which is why we've taken several actions to reduce the impact while providing the most reliable service possible. As part of the application process, Kentucky Power has included proposed customer benefits, such as:
- Introduction of an optional seasonal tariff to address high usage during winter months.
- Expansion of tree clearing program aimed at increasing reliability.
- Increased funding for the company's energy assistance programs to allow more customers the benefit.
- Extension of bill due date from 15- to 21-days to give customers more flexibility.
How can securitization help reduce rate impact?
Kentucky Power worked with the Kentucky General Assembly to pass Senate Bill 192, which allows utilities in certain circumstances to utilize a financial mechanism known as securitization to recover costs associated with the retirement of power plants and severe weather events. While we won't know how much securitization saves customers until it is executed, it can minimize the rate impact for our customers and help shift financial burdens for the company.
We're here to help
Kentucky Power is focused on bringing economic development opportunities to eastern Kentucky and supporting the communities we serve. We offer several ways to help customers lower their bills and use less energy - because you pay only for the electricity you use.
Customers can enroll in an Average Monthly Payment plan (AMP) that spreads the cost of your heating and cooling over an entire year, helping to balance your electric bills and making it easier for you to budget. We also offer extended payment arrangements and payment assistance programs. If you are struggling to pay your bill, please call us at 1.800.572.1113 so that we can help.
2023 Rate Review FAQs
-
-
A rate case, or rate review, is a comprehensive and transparent process in which the Public Service Commission (PSC) reviews costs, practices and rates of a utility to determine whether the utility's rates are fair, just and reasonable. A rate case is the financial mechanism in which a regulated utility operates to maintain reasonable rates that customers can afford and still allow the necessary financial resources for the company to operate effectively.
Often, it takes several months to reach a resolution. As part of the ratemaking process, Kentucky Power employees and consultants submit written testimony, respond to hundreds of inquiries through a process called "discovery," and they serve as witnesses during hearings. The Kentucky PSC typically holds public meetings to seek customer input, explain the facts of the case, and work with external representatives who intervene in the case.
Complete documentation of the filing is available on the PSC's website at: https://psc.ky.gov, where the hearings will also be available through live streaming. The public is also invited to attend hearings and submit public comments.
-
-
The timeline included in our last rate case required a new review effective in 2024. To comply with that order, we filed a rate review on June 29, 2023. A rate review also works to enable Kentucky Power to improve the financial health of the company. Although the current authorized return on equity is 9.3 percent, the company's actual return is only around 3 percent.
-
-
There is no set schedule and a utility can file a rate case as soon as the last rate review ends. However, Kentucky Power has not filed a rate case since 2020.
-
-
The electric utility industry, of which Kentucky Power is a part, is a regulated monopoly because competition in the utility industry only adds to costs, as the equipment needed to generate and supply electricity to homes and businesses is incredibly expensive to purchase, maintain, and operate. The Kentucky Public Service Commission capped our profit, or return on investment, at roughly 9 percent, but we are currently operating at only a 3 percent return. Many factors affect a company's return on equity. Some of the biggest factors for Kentucky Power's low return are declining population, decreased load, and increased costs due to weather, increased interest rates and inflation. A return that low hampers our ability to attract investors and access low-cost capital, which further increases our costs.
-
-
Since 2008, Kentucky Power has lost more than 11,400 customers and experienced 26 percent loss of load. Losing customers and load causes increased rates for our remaining customers.
-
-
In rate making, the number of customers represents the denominator. The denominator represents the number of parts another number is divided into. As the number of customers decreases rates increase for the remaining customers. In other words, there are fewer customers to share fixed costs.
A significant portion of a utility's expenses are fixed costs that do not vary depending on the amount of electricity sold. Examples of fixed costs are lines, poles, transformers and buildings. When a regulated utility loses customers, fixed costs are spread over fewer remaining customers causing the price of electricity to increase.
Kentucky Power works diligently to manage budgets, staff and costs to help make electricity as affordable as possible. Creating more jobs and bringing more people to (and back to) the region is Kentucky Power's chief economic development goal. In turn, more customers for the company produce reduced or stable rates for customers.
-
-
An example of the expanded distribution reliability program includes additional vegetation management for trees outside of rights-of-way. Nearly half of the outages in Kentucky Power's service area are due to trees falling outside of the right of way. A few years ago, Kentucky Power implemented a pilot program to expand the right of way. What we found was that in areas with expanded rights of way, tree-related outages were reduced by 15 percent.
-
-
Securitization is a financing tool available to utilities to help mitigate rate increases. Utilities typically finance their operations through a combination of debt and equity and are often authorized to receive a return on equity of over 9 percent. For example, Kentucky Power's authorized return on equity is currently 9.3 percent, with 9.1 percent used in the calculation of certain riders.
Securitization allows the company to sell regulatory assets to a Special Purpose Entity (SPE) for the right to recover a future stream of cash flows. The SPE will issue bonds, that within the legislative framework, will allow for the highest credit rating and lowest cost of capital. Through the SPE, collections will be made through a line item on customer bills, which cannot be bypassed and are irrevocable to the customer, allowing the SPE to repay the bonds issued. The company benefit comes from the fact that it will then have cash to reinvest or distribute.
-
-
Kentucky Power could securitize costs related to the Big Sandy plant and the significant storm damage.
-
-
Customers benefit because the total cost of financing will decrease, and costs can be spread out over a longer period.
-
-
The actual amount of savings is still dependent upon the rate that is available to Kentucky Power when financing of the securitization is executed.
-
-
The new law allowing utilities use securitization requires that the charges be recovered through a separate line item on bills. Bills will include a new line item called "securitization financing". Although this new line item will be on customers' bills, it will include costs previously recovered in the Big Sandy Decommissioning Rider and other costs that would be recovered in base rates.