News

1/14/2010

KU to ask for 11.5% rate increase

By Scott Sloan
ssloan@herald-leader.com

Kentucky Utilities plans to notify the state Public Service Commission on Thursday that it will begin a rate case later this month, seeking to raise electric rates by 11.5 percent, or $136 million, overall.

The utility provides power to more than 500,000 homes, farms and businesses in 77 counties in Kentucky and five in Virginia. It attributed the request to starting operation later this year of a coal-fired generator and costs from last year's ice storm and the late 2008 wind storm.

Under the request that will be submitted to the PSC, the utility would raise residential rates 13.7 percent. The average residential customer, seen as one using 1,230 kilowatt hours a month, would see bills rise $11.85 a month.

"We understand it's going to be a burden for some of our customers," said spokesman Chip Keeling. "But we're lucky to have among the lowest rates in the country.

"We've made some very, very significant investments in our infrastructure," he added, noting that a generating unit at the company's power plant in Trimble County, on the Ohio River between Louisville and Cincinnati, is set to begin operation this summer. The cost for the 760-megawatt unit is estimated at $1.2 billion. The company also has upgraded transmission lines, which included a $6.5 million project in Lexington to rebuild and rewire 4.5 miles of lines.

And then there were the storms.

The ice storm last year resulted in almost 2,500 broken poles that needed to be replaced, Keeling said, in addition to new distribution lines and other repairs. The company is asking to spread those repair costs — more than $130 million for it and sister company Louisville Gas and Electric — over five years for customers, said Lonnie Bellar, vice president of state regulations and rates for the utility's parent company, E.ON U.S.

Generally, the PSC does not grant utilities their full increase. PSC spokesman Andrew Melnykovych said the commission has 10 months to rule on the proposed rates.

KU's last rate case began in July 2008, when the utility asked for an increase that would have pushed up residential electricity bills by 7.3 percent, or $4.50 a month for the average customer. In the end, bills stayed pretty much the same.

KU's proposed rates include a higher percentage increase for residential customers compared with the proposed 11.1 percent increase for business customers. Bellar, of E.ON U.S., said that's because costs to service residential customers have increased more than those for businesses.

"The storm repair is a good example," he said. "The majority of the storm repairs related to providing service to residential customers with all the neighborhood repairs."

The utility emphasized that while it's asking for higher rates, they will still be lower — at 8 cents per kilowatt hour — than the averages of all but one surrounding state, which range from 8.97 cents in Tennessee to a high of 11.51 cents in Ohio.

By comparison, Kenergy Corp.'s residential rate is 7 cents.

The exception is West Virginia, where rates average 7.87 cents, according to the federal Energy Information Administration. But Keeling said a pending rate case in that state probably will push rates above KU's.

The average U.S. residential rate is 11.96 cents per kilowatt hour.

Kentucky traditionally has some of the lowest electric rates in the nation; only states in the Northwest tend to have lower rates.

Those Northwest states are more accessible to the lowest-cost fuel, hydroelectric power, Keeling said. "In times when they have droughts, we tend to be lower than them," he said.

Keeling encourages customers concerned about their bills to call KU and discuss the utility's energy-efficiency programs.

"That's not going to make their bills any less necessarily, but they're not going to make them as high as they could be," he said.

LG&E also will notify the PSC on Thursday that it will seek a rate increase. The utility will ask permission to raise electric rates by 12.1 percent total and natural gas rates by 7.8 percent. Its average residential electric customer would see bills rise $8.92 based on the proposal, and gas customers would see bills increase $4.75.

The increase for LG&E electricity customers is based on them using 992 kilowatt hours a month, less than the amount pegged as average for KU customers. E.ON U.S. representatives said LG&E customers typically use less electricity because natural gas has a higher penetration in its territory, whereas some parts of KU's territory have electricity only.

(Kenergy Corp. added to this story.)

Back to News