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LG&E KU Propose Rate Increase Of More than $200 Per Year

Rubbertown by J. Tyler Franklin, Louisville Public Media-105859
Photo by J. Tyler Franklin
The Mill Creek Generating Station in southwest Louisville.

Nearly a million Kentuckians could see their gas and electricity rates increase under a proposal from the state’s largest utility, according to a rate adjustment application with the Kentucky Public Service Commission.

Louisville Gas & Electric and Kentucky Utilities are asking state regulators to raise rates on Kentuckians for the third time in four years, resulting in approximately $334 million in additional revenues for the utility per year, according to testimony from LG&E/KU CEO Paul Thompson. 

The typical residential customer with both gas and electricity would pay an average of $215 more per year under the proposed rate increase. 

The average residential electric bill would increase about 12% or about $11.74 per month while the typical residential gas bill would increase more than 9%, or about $6.17 per month.  

In testimony provided to state utility regulators, Thompson described a landscape where energy efficiency and conservation have flattened sales, environmental regulations combined with the declining costs of gas and renewable energy are hastening the demise of LG&E’s coal-fired power plants, and where power companies need to make investments for the future. 

Thompson told regulators the utility is aware of and “sensitive” to the financial challenges facing customers brought on by the COVID-19 pandemic, and to that end delayed asking for the rate increase by two months. 

“Ultimately, we have conviction that the investments the Companies have made and planned to  make as part of these proceeding (sic) are beneficial and least-cost to customers, and thus are beneficial in the current environment and in the future as life and the economy recover from the pandemic,” Thompson told regulators. 

The utility is also proposing an economic relief surcredit that would go into effect after the rate increase and reduce the average residential electric bill by about $3 per month, and gas by about $0.33 per month for the first year.

The Metropolitan Housing Coalition is one of several advocacy groups that has intervened in the rate case in support of low-income families. Executive Director Cathy Kuhn says a $200 or more annual increase in bills would be difficult for many families to manage, especially in light of the pandemic.

“That we’re talking about a rate increase at a time when so many families are really, really struggling, it’s really kind of hard to understand,” Kuhn said. “Frankly, it felt a little tone deaf.”

More than 100,000 Kentucky residents were at least a month behind on their bills as of the end of October when utility regulators lifted the moratorium on utility disconnections, according to Thompson’s testimony. Those behind on their bills are enrolled into a 12-month payment plan, but if those payments aren’t made on time, customers could have their service disconnected. 

Kuhn says there’s another way in which the proposed rate increase would disproportionately impact low-income households: the utility is proposing small increases in fixed daily services charges that add up to about $26 per year for electric customers and more than $47 a year for gas customers.

Increasing fixed charges negates a customer’s ability to reduce energy consumption to lower their bill. Additionally, she said, the more dense the housing, the more fixed fees the utility makes, suggesting people in multi-family housing collectively bear the weight of the increase more than wealthier customers. 

“And in that way, those folks who are living in those areas with a lot of meters are essentially subsidizing the energy of those who live in higher income, more geographically spread out areas,” Kuhn said. 

Smart Meter Deployment

Additionally, LG&E is once again seeking permission from state regulators to install smart meters over five years to replace the current generation of electric and gas meters. 

Smart meters, also known as Advanced Metering Systems, use radio transmitters to relay data in real-time back to utilities, like Wi-Fi for your energy meter. They also provide granular information about energy usage. 

Thompson told utility regulators smart meters would help modernize operations, reduce customer costs and provide them with personalized consumption data, according to testimony.

Privacy advocates say reading people’s energy use in real time could be intrusive, allowing utilities to know more intimate details about when you use water and electricity, and for how long.

If approved, customers who want to opt-out would have to pay a one-time fee of $35 and a monthly charge of $12. 

Changes To Net Metering 

Net-metering customers who installed solar panels or other distributed energy sources after January 1, 2021, would receive less value for the electricity they put back on the grid under the utility’s rate plan. 

Right now, net-metering customers receive a credit for the retail rate of about 9.8 cents per kilowatt hour for the electricity they put back on the grid. 

Under LG&E/KE’s new proposed date, any electricity that a solar panel sends to the grid would be worth about 2 cents per kilowatt hour, which LG&E says is consistent with the wholesale cost of producing electricity, said Natasha Collins, LG&E spokesperson.

Solar advocates say lowering the value of net-metering would undermine the market for rooftop solar and hinder growth in the state at a time when humanity is looking for solutions to reduce greenhouse gas emissions in the face of climate change.

LG&E’s parent company, PPL Electric Utilities corporate goal is to reduce C02 emissions 80% from 2010 level by 2050 — far short of the deadline set by scientists in the United Nations report on climate change that calls for reaching net-zero emissions by 2050. 

LG&E has asked utility regulators to conduct the review and make a decision so that the new rates take effect July 1, 2021.

Ryan Van Velzer is WFPL's Energy and Environment Reporter. Email Ryan at rvanvelzer@lpm.org.