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Delay, Dismissal Sought In LG&E Rate Case

Pratt, Liz

Several of the groups intervening in the case over the proposed rate increase by Louisville Gas and Electric and Kentucky Utilities are asking state regulators to either dismiss the case or change the hearing schedule.

The parties — including the Kentucky Attorney General’s Office, Louisville Metro government, the Kentucky League of Cities and Walmart — say the utility filed inaccurate information about its cost of providing service to customers.

The errors were pointed out in early March. On March 31, LG&E filed a revised document laying out its costs, and the intervenors say they need more time to thoroughly review the new document before the hearings.

LG&E has opposed pushing the hearings back.

“I’m very troubled by the fact that LG&E would even object to our being able to review their forecasted data,” said Kentucky Deputy Attorney General J. Michael Brown. “Because any rate adjustment should be based on a complete record.”

LG&E is requesting the Public Service Commission approve a base rate increase of $107.4 million. The company estimates the average residential customer using both electric and gas will see an increase of nearly $13 a month.

The proposal has been controversial; besides the cost, LG&E has proposed raising the basic service charge that all customers pay rather than charging more based on usage. Opponents say this would disproportionately affect low-income customers, and reduce incentives for energy efficiency and renewable energy.

In an emailed statement, LG&E spokeswoman Natasha Collins said the utility believes the rate increase is justified and the case should move forward.

“The investments we are making are necessary in order to maintain our electric and natural gas systems and continue providing the safe, reliable service our customers have come to depend on," she wrote. "The investments will allow us to enhance system reliability, restore power to our customers more quickly, and provide them with information that will enable them to make more informed decisions regarding their energy use; while the proposed changes to the basic service charge will help reduce bill volatility and assist customers in better managing their energy bills.”

Costs Questioned

The document that LG&E acknowledges contained errors is called a “Cost of Service Study.” It lays out what it costs the utility to provide service to all of its various classes of ratepayers. And in rate cases like this, it’s the foundation for a lot of other calculations, like the amount of money the utility is allowed to recoup as profit.

“The revised studies showed the Companies’ spreadsheet error did not materially change the previous cost-of-service studies, and therefore did not change the Companies’ revenue allocation recommendations,” LG&E attorney Kendrick Riggs wrote in a response to the intervenors’ motion.

Deputy Attorney General Brown disagreed with the utility’s classification of the mistake.

“So it’s very flippant, it’s very cavalier of them to say ‘oh, this is just a tiny error’ when we don’t exactly know what this allocation result would come about if they’re just allowed to go forward and we don’t get a chance to look at it,” Brown said.

The intervenors also question LG&E’s intentions in filing the revised document. According to the motion, all of the parties were gathered for a hearing at the Public Service Commission on March 28. LG&E’s attorneys didn’t mention the error, but minutes after the hearing was over, the revision was filed.

Even before the discrepancy over the numbers emerged, there were pretty big disagreements over how much money is appropriate for the utility to recoup.

Both the Kentucky Attorney General’s Office and Louisville Metro government have offered calculations they believe are closer to reality than the $107 million increase LG&E proposed.

The Attorney General’s Office recommended an increase of $68 million across both LG&E and KU — a third of the utilities’ combined ask.

Louisville Metro government currently spends about $17 million a year on LG&E bills, and Jefferson County Attorney Mike O’Connell said the rate increase would add about $1 million a year to that number.

But O’Connell said his office’s estimation is the utility is justified in asking for a very small percentage of its initial request.

“The big picture is LG&E is asking for proposed increases amounting to $107 million,” he said. “And Louisville Metro’s position, based on expert testimony and other things, is right at $34 million. So there’s a large gap between what they want and what we think they’re entitled to receive.”

The LG&E and KU rate case is scheduled for public hearings Tuesday in Louisville, Wednesday in Madisonville and the following Tuesday in Lexington. Hearings before the Public Service Commission are scheduled for early May, though that could change if the commissioners grant the intervenors’ motion for a delay.