Following a three-year freeze on base rates for Kentucky Power customers, the Kentucky Public Service Commission (PSC) issued an order setting new rates effective January 14, 2021.
To lessen the rate impact for customers, the PSC accelerated distribution of the excess unprotected accumulated deferred income tax (ADIT) resulting from the federal 2017 Tax Cut and Jobs Act. This will create a credit on customer bills helping to offset new rates. The credit will now appear over three years, rather than 18 years as previously established, and will be larger than credits previously issued, which benefits customers.
For example, a residential customer using 1,100 kWh per month will receive a bill credit during winter months of approximately $24.05. As a result, the average monthly winter residential bill will actually decrease to $114.50, a reduction of 4.54 percent.
In non-winter months, for a residential customer with an average monthly usage of 1,100 kWh, the average bill will increase $18.59, or 15.46 percent, from $120.26 to $138.85.
Commercial and Industrial customers will also benefit from bill credits resulting from the return of accumulated tax balances. Based on rate design created by the PSC's order, some industrial customers, on average, will not see an increase in rates while other customers, including commercial class customers, may see up to a 4.7 percent increase on average. Business customers are encouraged to contact their Kentucky Power account manager for more detailed information.
The bill credit structure helps ensure customers receive maximum benefit during months where electrical usage is highest.
The order also reduced Kentucky Power's return on equity (ROE) to 9.3% for base rates. The return on equity does not guarantee Kentucky Power a profit, but gives the Company the opportunity to earn a fair return on its investment. The overall gross revenue requirement increase approved by the PSC was $52.4 million.