Electric and gas rates for about 1.3 million Louisville Gas and Electric and Kentucky Utilities customers will increase on Wednesday.
Kentucky’s public utility regulators approved the new rates for system-wide improvements. However, customers will also see increases on their bills due to changes in service charges and the expiration of a credit from the Trump Administration’s corporate tax cut last year.
The combined impact on a typical LG&E bill with both gas and electric service is about an additional $9.48 per month; and for the typical KU bill it’s about an additional $8.11 per month.
“It’s all money coming basically out of the same pot as far as most customers are going to be concerned,” said Andrew Melnykovych, Kentucky Public Service Commission spokesman. “But it’s going to change the appearance of the bill because that credit is going to be going away and instead be reflected in what the base rates are.”
The rate increases will net LG&E and KU nearly $77 million more in revenues annually, according to the Kentucky Public Service Commission. Those added revenues are for projects including stronger electrical wires, better power poles and more durable gas lines – and to maintain the rate of return for shareholders.
Kentucky’s public utility regulators approved the rates as the result of a settlement agreement between utilities and parties including the Attorney General’s Office.
Utility regulators said in a press release the rates are “fair, just and reasonable.”
LG&E spokeswoman Chris Whelan said they are pleased with the outcome.
“We don’t take our increases lightly and we are doing things to help the reliability and safety of the system,” Whelan said.
Breaking Down The Base Rate Increases
The “base rate” reflects both service and delivery charges. The last time base rates increased was back in June 2017.
The base rate increase for a typical LG&E electric bill is about 27 cents per month. For KU electric customers, it’s about $4.27 cents.
The typical LG&E gas bill will increase about $3.70 in the base rate part of the bill per month.
Base rates don’t include the cost of the gas itself and are adjusted every three months to reflect what LG&E pays on the wholesale market, according to the commission.
Monthly Service Charge
The Public Service Commission also granted the utilities’ request to switch from a monthly to a daily service charge – a change that also represents an increase, according to the commission.
“The service charge is now going to be assessed on a daily basis so it’s going to vary with the length of the billing cycle,” Melnykovych said.
Expiration Of the Tax Credit
LG&E/KU’s parent company Pennsylvania Power and Light was among the 30 most profitable companies that paid no federal income tax in 2018, according to the New York Times.
Customers were receiving a credit from the utilities as a result of the Trump Administration’s corporate tax cuts last year.
LG&E and KU passed part of that savings onto customers, but that credit expires when the new rates take effect on Wednesday.
As a result, KU customers will be paying about $3.84 more on their typical bill, while LG&E electric customers will increase by about $3.30; the typical bill for LG&E natural gas customers will increase about $2.21.
LG&E and KU received about 56 percent less in additional revenues than they initially requested from the Public Service Commission. The smaller increase is the result of lowering the rate of return for investors, according to the commission.