State, Lexington, KU reach deal to reduce electric rate increase

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LEXINGTON, Ky. (WTVQ) – Lexington has agreed in principle to a settlement that would reduce a rate increase proposed by Kentucky Utilities by almost one-third or $54.2 million per year. And the state also has reached an agreement on other areas.

“Our overall goal has been to keep the cost of living low in Lexington,” Mayor Linda Gorton said. “That is especially important right now as we work our way out of a pandemic.” Lexington, Louisville and the state joined forces in opposing the rate increase.

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In Lexington, KU’s increase for residential users will average $7.82 a month in the first year; $8.63 a month in subsequent years. The new rates will be applied later this year, assuming the agreement is approved by the Kentucky Public Service Commission, which regulates utilities in the Commonwealth.

KU also agreed to:

  • No increase in the fixed customer charge, the amount customers pay regardless of how much energy they use.
  • No additional increases to the base rate customers pay for four years. In the past decade, the Company has been asking the Kentucky Public Service Commission for rate increases every two years.
  • An increase in the assistance KU provides to low income consumers.

KU serves 77 counties across Kentucky, including Lexington.

Meanwhile, Attorney General Daniel Cameron announced his Office of Rate Intervention (ORI) reached a settlement agreement with Louisville Gas & Electric (LG&E) and Kentucky Utilities (KU) to save Kentuckians $113.9 million in proposed electric and gas rate increases.

The proposed settlement was signed by all intervenors, including Louisville-Jefferson County Metro Government and Lexington-Fayette Urban County Government.

“As the watchdog for Kentucky ratepayers, we pursued a settlement with LG&E and KU that saves Kentuckians more than $113 million in proposed utility rate increases and ensures the companies will not impose an additional rate increase before July 1, 2025,” said Cameron.  “The settlement also seeks to maximize the lifespan of three Kentucky coal-fired generating plants and their benefit to consumers.  I appreciate all the parties coming to the table and working together to reach an agreement.”

In November of last year, LG&E and KU filed applications with the Public Service Commission (PSC) seeking to increase rates by $331.3 million, an increase of 10.4 percent for KU customers, 11.83 percent for LG&E Electric customers, and 9.13 percent for LG&E Gas customers.

LG&E and KU are the largest investor-owned utility companies in the Commonwealth, and the proposed increases would have significantly raised rates for the more than one million Kentucky customers served by the companies.

The settlement agreement saves Kentuckians $113.9 million, or 34 percent of the proposed rate increases.

The companies settled for a reduced increase and agreed not to impose new rate increases before July 1, 2025.

The terms of the settlement specify that the companies will apply an economic surcredit to the increases in the first year.  In year two, the increases for residential customers will be 7.2 percent for KU and LG&E Electric customers and 6.4 percent for LG&E Gas customers.

The settlement also ensures that Kentuckians experience no increase to the residential monthly minimum charge, a cost that is billed to customers each month regardless of utility usage.  Low-income ratepayers will also receive additional assistance through an increased shareholder contribution arising from the settlement agreement.

The settlement also eliminates LG&E’s and KU’s request for accelerated depreciation rates of three Kentucky coal-fired generating plants utilized by the companies (Mill Creek I and II and Brown III), ensuring Kentucky ratepayers receive a greater benefit on the investment, which may help the coal plants remain in operation longer.

The agreement also provides for a coal mining economic development option under existing tariffs to assist new or expanding coal mining operations.

The settlement was filed Monday before the PSC and was signed by LG&E and KU and all intervenors, including Louisville-Jefferson County Metro Government; Lexington-Fayette Urban County Government; Kentucky Industrial Utility Customers; Kentucky Solar Energy Society; Kentucky Solar Industry Association, Inc.; Metropolitan Housing Coalition; Sierra Club; Kentuckians for the Commonwealth; Mountain Association; the Kroger Company; Walmart, Inc.; the U.S. Department of Defense; and the Attorney General’s Office.

The settlement is pending final approval by the PSC and can be viewed here. To view exhibits for the LG&E filing, click here. To view the exhibits for the KU filing, click here.