PSC Rules On Rate Increases Sought By Kentucky Power Company

PSC Rules On Rate Increases Sought By Kentucky Power Company Commission defers decision on net metering, while providing important victories for ratepayers on most issues.

In a proceeding important to the future of rooftop solar in Kentucky, the Kentucky Public Service Commission issued its first order in a utility rate case proposing changes to net metering. In Case No. 2020-00174, the investor-owned electric utility Kentucky Power Company (KPC) proposed changes to their net metering tariff, dramatically reducing the value of customer-generated solar energy fed into the grid, by some 75%. KPC also proposed raising residential rates by 25%, despite the economic hardships many of its customers are already facing in a region that has suffered an economic downturn for over almost two decades.

In its order, the Commission deferred a decision on KPC’s proposed changes to net metering, requesting additional testimony on how to properly value fed-in electricity. The PSC has established a new procedural schedule for reviewing KPC’s net metering proposal and will issue a final ruling no later than May 14, 2021. The  Commission cited KPC’s lack of a “cost of service” study as a reason to defer a decision on their proposed net metering rates. They also rejected KPC’s argument that their “avoided cost” was the appropriate value for customer-generated solar energy.

Net metering was one of many issues of concern to a coalition of public interest organizations that intervened in the KPC rate case. The coalition, including Kentuckians For The Commonwealth, the Kentucky Solar Energy Society, and the Mountain Association, is represented by the Kentucky Resources Council. James Owen of Renew Missouri served as an expert witness for the coalition.

The PSC sided with the coalition on many issues important to residential ratepayers:

• The PSC reduced the total revenue increase sought by KPC by 25 percent, from $70 million to $52 million. 
• KPC was granted a 9.3% Return on Equity (ROE), much lower than the 10.0% ROE they had requested.
• The PSC denied the company’s plan to spend tens of millions of dollars on new, advanced meters (AMI), sparing customers from additional charges to pay for those upgrades. While the coalition sees potential value in AMI metering, KPC failed to demonstrate how they would use AMI to provide the most benefit to their customers. KPC had also proposed to immediately begin charging all customers for the AMI meters, even though the deployment would be spread over multiple years, leaving many customers paying for new meters years before having one installed on their home and before the investment was demonstrated to be useful to ratepayers.
• The PSC rejected Kentucky Power’s proposed “declining block rates” for residential customers, which would have provided lower rates to their highest energy users. The coalition pointed out that this approach discourages investments in energy efficiency and rooftop solar and punishes households who attempt to manage their energy bills by conserving energy. 

Over the objection of the coalition, the Commission approved the utility’s request to increase the monthly fixed customer charge that all residential customers pay, from $14.00 per month to $17.50 per month. Residential energy rates were increased from 9.8 cents per kWh to 11 cents per kWh, a 12% increase compared with the 25% increase sought by the utility. The rejection of a number of other requests by KPC did, however, significantly reduce the adverse financial impact of the residential rate increase.

Continuing to Advocate
The coalition of solar and community advocates will continue to work in support of net metering as the Commission deliberates upon KPC’s net metering proposal. Meanwhile, they have turned their attention to LG&E/KU’s rate cases (#2020-00349 and 00350). LG&E/KU have also proposed new net metering tariffs which would dramatically reduce the value of customer-generated solar energy to the “avoided cost” rate (under 3 cents per kWh).

KFTC, KYSES, and MA have joined with the Metropolitan Housing Coalition to intervene in these cases, once again represented by Tom FitzGerald of the Kentucky Resources Council.