Environment

Louisville Gas & Electric and Kentucky Utilities are proposing to withdraw the rate case pending before the Kentucky Public Service Commission, after reaching a settlement with intervenors.

Under the terms of the settlement, LG&E electric and gas customers’ bills are expected to increase by about $1.15, while KU ratepayers will pay about $9 more each month. The original proposal would have resulted in much larger increases by making changes to the monthly service charge customers pay for electricity.

Critics of the plan argued that changing that monthly fee across-the-board would discourage energy efficiency and burden the poor. The settlement agreement does not include any changes to the monthly service charge.

In the settlement, LG&E and KU agreed to study and possibly expand its Demand Side Management Program, which encourages industrial customers to use less energy. The companies will also put $1.15 million each year into a fund that helps low-income customers pay their bills.

LG&E and KU did not immediately return requests for comment.

Intervenors in the case included Kentucky Attorney General Jack Conway, the Sierra Club, the Kentucky Industrial Utilities Customers, Kroger, Wal-Mart and the Metropolitan Housing Coalition.

The settlement still has to be approved by the Public Service Commissioners.

Update: LG&E and KU’s Official News Release

LG&E and KU have issued the following:

Under the settlement agreement, the monthly basic service charge for LG&E and KU residential customers will not change. Instead, the per-kilowatt charge will be modified to provide additional annual cost-recovery revenues of $125 million for KU, incorporating costs associated with the new 640-megawatt natural gas combined-cycle generating plant at the company’s Cane Run site among other investments. KU owns 78 percent of that facility, with LG&E owning the remaining 22 percent.

The settlement agreement provides no increase in revenues for LG&E’s electric operations and a $7 million increase in LG&E’s gas operations. The average KU residential customer bill will increase by approximately $9 per month. The average LG&E electric customer will see a slight reduction of 10 cents per month, while the average LG&E gas customer will see a monthly increase of approximately $1.25 per month.

A settlement does not attach specific dollars or concessions to any particular issue in the case, but provides an overall settlement that on balance is a fair, just and reasonable result. This means that no return on equity was established with respect to base rates; however, the average customer’s monthly bill will reflect a 10 percent return on equity investment related to the environmental cost recovery mechanism and the gas line tracker mechanism. The settlement agreement also provides for deferred cost recovery of a portion of the costs associated with pensions and KU’s Green River plant which is currently scheduled to be retired in April 2016.

In addition to LG&E and KU, parties to the unanimous settlement agreement included: the Attorney General of the Commonwealth of Kentucky; the Kentucky Industrial Utilities Customers; the Lexington-Fayette Urban County Government; the Kroger Company; the Community Action Council of Lexington-Fayette, Bourbon, Harrison, and Nicholas Counties; Kentucky Cable Telecommunications Association; Kentucky School Boards Association; Sierra Club; Wal-Mart Stores East, LP and Sam’s East; Association of Community Ministries; and Metropolitan Housing Coalition.

“The open and direct dialogue between all parties enabled this settlement agreement,” said Kent Blake, chief financial officer. “While it is likely no single party got everything they wanted, this settlement agreement provided all parties with an agreement they could support in the best interests of our customers.”

LG&E and KU also agreed to a minimum annual contribution of shareholder funds of $1.15 million to low-income programs. The current Home Energy Assistance program also will become a permanent program under the companies’ tariffs and maintain its current rate of 25 cents per meter.

The agreement also provides for an extension of the collection period for residential customer deposits from four to six months. Additionally, LG&E and KU have agreed to develop an energy efficiency filing for Kentucky’s school districts and reaffirmed their commitment to study the feasibility of energy efficiency programs for industrial customers.

If approved, the new rates and all elements of the settlement agreement with the utilities and interested parties would take effect July 1.