Kentucky’s largest utility companies have reached a proposed settlement with the office of Attorney General Russell Coleman that would cut their proposed rate increases for electric customers roughly in half.
The settlement relates to an ongoing rate case before the Kentucky Public Service Commission, in which Louisville Gas and Electric and Kentucky Utilities sought to increase the average monthly rate for residential electric customers by $11.04 and $18.14, respectively.
Under the settlement, LG&E would instead increase monthly electric bills by $5.04, while KU would increase theirs by $9. Whereas LG&E originally sought to increase the average monthly gas bill by $11.12, under the settlement it would increase by $8.10.
The settlement adds that the companies must lock in these rates until at least August 2028 — though all of these proposed changes must first be approved by the state regulators of the Public Service Commission.
Joining the settlement agreement this week were Kroger, Walmart, Kentucky Industrial Utility Customers, the local governments of Louisville and Lexington, federal agencies and environmental group the Sierra Club.
In a press release announcing the proposed settlement, Coleman said it would prevent double-digit rate increases that customers in other states are currently seeing on their bills.
“The Attorney General’s Office has a duty to protect Kentuckians' affordable and reliable energy,” Coleman stated. “This agreement is a win on both fronts as we head into the winter months.”
LG&E/KU serve more than 1.3 million customers in Kentucky across 94 of its 120 counties.
The utility companies said the rate increase was needed in order to make infrastructure and technology upgrades. These included installing stronger wires and poles to withstand more frequent and severe storms, as well new meter technology.
The Sierra Club said the settlement reducing the rate increases was a result of the public outcry from citizens who made their opposition known at public comment hearings of the PSC in the case.
“We're really glad that LG&E/KU have started paying attention to customers and what they need,” said Elisa Owen, the senior organizer of the Sierra Club’s Beyond Coal Campaign in Kentucky. “We think that it is good for them to listen to the reality that they are asking for too much from those people who are their captive customers, and we are glad that the AG and other stakeholders were able to bring about this settlement.”
However, Owen added her frustration about the rate case itself, saying the utility companies were asking for rate increases to pay for routine business expenses — such as trade associations, lobbyists and “vegetation management expenses” — instead of necessary infrastructure to transport electricity.
“We think that this whole case was an attempt to move, generally, just reimbursable expenses onto the rate base,” Owen said. “So we're glad that they're only getting half of (the rate increase), but they need to be careful about what they ask for reimbursable expenses on.”
Owen added that the companies want higher rates to go towards making repairs from increased major storms, but “their investment decisions in fossil fuels, fossil fuels and more fossil fuels are helping to make those storms worse, and now they want us to clean up after it.”
One collection of environmental and consumer advocacy groups that intervened in the rate case did not join onto the proposed settlement, arguing it does not stabilize rates for customers.
Kentuckians for the Commonwealth, Kentucky Solar Energy Society, Metropolitan Housing Coalition and Mountain Association are represented in the case by Byron Gary, an attorney for environmental group Kentucky Resources Council.
Gary pointed to two new riders in the settlement he said would allow them to keep earnings up to 10.15% and not the 9.9% return on equity that is on the face of the settlement, as well as pass through million of dollars of construction costs for new electric units without advance review by the public or state regulators to see if such spending is prudent.
“The total costs of these additions largely offsets any settlement savings, and if approved, ratepayers will continue to see their actual rates rise despite the supposed lock in,” Gary said.
This rate case is separate from another major case that will be decided by the Public Service Commission next week. LG&E/KU in the latter case are seeking permission from state regulators to spend nearly $3 billion to build two new 645 megawatt natural gas plants, as well as extend the life of two coal plants. They say this is needed largely because of their forecast of huge energy demand from future data centers they expect will be built in Kentucky.
Attorney General Coleman previously reached another proposed settlement in that case to keep the coal plants online and scrap a proposed battery storage facility. The settlement also includes a new “extremely high load factor” (EHLF) tariff mechanism they say would make new data centers pay their fair share of the costs to build the new plants and protect existing ratepayers.
Consumer and environmental advocates — including the Sierra Club and intervenors represented by Gary — argue these protections still aren’t strong enough, urging state regulators to do more to shield them from risks that could be felt in their monthly bills due to future data centers that still remain speculative.
The actual EHLF tariff structure for data centers is in the separate rate case that was the subject of the new settlement reached this week. The settlement changes one aspect of the tariff, lowering the threshold of customers that would be subject to it from those who use at least 100 megawatts to at least 50 megawatts.
The Public Service Commission must make a decision on the companies request to build out the new power plants by Oct. 28, and would make a decision on the rate case either late this year or into 2026.
