LG&E, KU Settlement Includes Retrofit Delays, More Money for Energy Assistance

by Erica Peterson on November 10, 2011

By Jean-Pierre Daniel - Ligne à haute-tension 400.000 volts - Centrale de FessenheimUtility companies, environmental groups, non-profits and the state have reached an agreement in a rate case pending before the Kentucky Public Service Commission.

The settlement was presented to commissioners today in Frankfort. Louisville Gas and Electric and Kentucky Utilities’ original plan included $2.5 billion in environmental upgrades. The new agreement is cheaper—$2.25 billion. That’s because the companies have agreed to not seek upgrades for the E.W. Brown plant in Harrodsburg.

LG&E spokeswoman Chris Whelan said that was a deal the utilities cut with environmental groups.

“We think at this point if we put the retrofits on it, it was the most cost-effective way to do that, however one of the concessions was that we would delay that,” Whelan said. “So once we have a clearer picture of the rule as final, then we’ll come back and do what we need to do to upgrade them in order to meet the environmental regulations.”

But the environmental interveners in the case are gambling on that not happening. Kristin Henry is an attorney for the Sierra Club. She says her organization expects the federal government to issue additional air standards for power plants in the next two years…

“…which would make retrofitting these plants not the economic option, at which point in time, Sierra Club is confident that they would choose to retire these facilities,” she said.

The utilities also agreed to pay an additional $500,000 into the companies’ home energy assistance programs, to help bear some of the burden of higher rates for low-income customers. Those funds will come from shareholders, but an additional one cent increase on all bills will provide extra money.

Company shareholders will also receive a slightly smaller return on equity from the environmental upgrades.

The elimination of upgrades at the E.W. Brown plant means slightly smaller rate increases will go into effect, if the deal is approved by the Public Service Commission. The average LG&E residential customer will see an increase of $1.80 in 2012, and then by 2016 bills will rise by $15.60 a month. For KU residential customers, there will be a 69 cent increase in 2012, and a $7.47 increase by 2016.

The settlement has to be approved by the Public Service Commissioners. Their decision is due by mid-December.

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