Office of the Attorney General
Attorney General Conway Announces Proposed Rate Increase Settlement With E.ON
Attorney General Jack Conway announced today that his Office of Rate Intervention and E.ON U.S., the parent company of Louisville Gas and Electric (LG&E) and Kentucky Utilities (KU), have reached a proposed rate increase settlement that will save ratepayers more than $67 million.
“Negotiating this case was one of my top priorities because I know, with today’s economic climate, many Kentuckians are having trouble making ends meet and simply can’t afford the type of rate increases proposed by these utilities,” General Conway said.
LG&E serves 318,000 natural gas and 390,000 electric customers in Louisville and 16 surrounding counties. KU provides electricity for 518,000 customers in Fayette and 76 other Kentucky counties. LG&E and KU are Kentucky’s two largest regulated utilities.
LG&E and KU had submitted a combined $69 million in proposed rate increases for gas and electric customers to the Public Service Commission (PSC) for its approval. The PSC sets rates for public utilities in Kentucky. The Office of the Attorney General intervenes on behalf of ratepayers in front of the PSC.
Terms of Settlement
LG&E electric had requested more than $15 million in rate increases. Attorney General Conway and his staff, during negotiations, actually secured a more than $13 million decrease in current electricity rates for residential consumers - a net savings of more than $28 million. The typical LG&E residential customer will see electricity rates decrease by $12 a year.
KU requested a more than $22 million increase in electricity gas rates. Attorney General Conway and his staff opposed that request, and ratepayers will actually see their rates decrease by $8.9 million from the current rates – a total savings of more than $31 million. The typical KU residential customer will see its rates decrease by $7.20 a year.
E.ON U.S. supported its case for an electricity rate increase by changing the way it traditionally depreciates capital assets and increasing its profit margin. It also wished to implement temperature normalization adjustments for customers, a program that sets rates based on an average temperature, guaranteeing income for the company even if the area experiences unseasonably cool summers and consumers reduce usage usage. All of these proposals were eliminated as part of the settlement.
“I am pleased that E.ON worked with my office, in good faith, to provide some much-needed relief for families in Kentucky,” General Conway said.
LG&E gas submitted a $29.8 million proposed increase in its natural gas rates. Under the negotiated settlement, natural gas rates would increase by $22 million – a net savings of almost $8 million for residential ratepayers. The rate increase compensates LG&E for its increased costs of delivering natural gas to customers. The typical LG&E residential gas customer will see an increase of $5.10 per month.
LG&E and KU also agreed to several provisions to assist low-income customers. Those provisions include: providing $300,000 a year to heating assistance programs, lengthening payment plans for customers who require deposits to secure service, and the possibility of waiving late fees for some pre-certified consumers.
There will be a hearing on January 13, 2009 at 10 a.m. at the PSC, which must approve the terms of the settlement. According to the settlement, the new rate structure would take effect on February 6, 2009.