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Kentucky Power implemented new rates for customers in January 2024, as approved in an order from the Public Service Commission of Kentucky (PSC) received on Jan. 19, 2024. The order included approval for a 5.66 percent residential rate increase. Customer bills will reflect the new rates for services rendered on and after Jan. 16. The order was in response to Kentucky Power's rate review filed in June 2023, the company's first review in three years.
Several customer programs benefitting customers included in the rate review were also approved by the PSC, including:
On January 10, 2024, the PSC also approved Kentucky Power's request to use securitization, a financing tool that will enable Kentucky Power to reduce financing costs and extend the length of time to recover incurred costs such as major storm outages and generation expenses. The securitization process can take several months. Although securitization will be a new line item, customer bills will be lower than they would be under the current recovery process.
Kentucky Power is focused on bringing economic development opportunities to eastern Kentucky and supporting the communities and customers 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.
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.
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.
Securitization is a financing tool available to utilities to help mitigate rate increases. Specifically, the Company can seek to securitize significant costs at reduced financing costs and at an extended length of time.
Kentucky Power will securitize costs related to the Big Sandy plant and significant storm damage expenses such as those incurred during the 2022 historic flood event.
Customers benefit because the total cost of financing will decrease, and costs can be spread out over a longer period. The company benefits from the fact that it will have cash to reinvest or distribute.
The actual amount of savings is dependent upon the rate available to Kentucky Power when financing of the securitization is executed.
The new law allowing utilities to use securitization requires that the charges be recovered through a separate line item on bills. Bills will include a new line item called Securitized Surcharge Rider that will ultimately result in customer bills being lower than they would be under the current recovery process.
Kentucky Power filed its 2022 Integrated Resource Plan (IRP) on March 20, 2023, with the Kentucky Public Service Commission (PSC) in Case No. 2023-00092. Kentucky electric utilities are required to file Integrated Resource Plans with the PSC every three years.
The IRP provides a utility-specific plan that balances customer electricity demand with the required generation resources at the lowest reasonable cost over a 15-year period. While the IRP seeks to match customer activity with resource needs, it is not a commitment to a certain resource. Rather, the IRP provides a framework for identifying cost-effective resource options while leaving final selection and approval to future PSC proceedings.
The goal of the IRP process is to develop a plan identifying the amount, timing, and type of resources required to supply capacity and energy as part of Kentucky Power's obligation to ensure a reliable and economical power supply to its customers. There are four main objectives guiding the preferred plan: customer affordability, rate stability, maintaining reliability and sustainability.
The rates you pay are reviewed and approved by the Kentucky Public Service Commission. Kentucky Power provides Internet access to its state jurisdictional tariff documents for the convenience of its customers. Kentucky Power makes no warranty that a particular tariff/schedule chosen by a customer is available to or suitable for that customer. Customers are encouraged to contact Kentucky Power directly to ensure the applicability of a desired tariff/schedule for their service requirements.
Administrative regulations of the Kentucky Public Service Commission
Kentucky Power tariff
Kentucky customer bill of rights
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