The Kentucky Public Service Commission on April 13 said that it has reduced an electric base rate increase sought by Duke Energy Kentucky, and that as a result, the average monthly bill for a typical residential customer using 1,000 kWh will increase by about $2.56, or about 3.2%.
The company’s original rate adjustment request would have produced a monthly increase of $15.17, the commission said, noting that a subsequent revised request would have increased a typical monthly residential electric bill by $9.73.
The commission noted that it granted the company an annual revenue increase of $8.4m, which is about 28% of the company’s revised request for a $30m annual increase. Duke Energy Kentucky originally asked for an annual increase of $48.6m, but later reduced the amount, mostly to reflect changes in the federal corporate income tax rate, which were made after the company filed its application, the commission said.
Changes resulting from the reduction in federal corporate income taxes, which took effect Jan. 1, produced $14.74m, or more than a third, of the $40.2m reduction from Duke Energy’s Kentucky’s original request for a revenue increase, the commission noted.
The commission said that it granted Duke Energy Kentucky’s request to increase the monthly residential service charge, which will increase to $11, up from the current $4.50, and 10 cents below the company’s revised request. To limit the overall rate increase to the level determined by the commission, the residential electric usage charge will be reduced from about 7.5 cents per kWh to about 7.2 cents per kWh, the commission said.
Rates for other customer classes also will increase in proportion to the overall revenue increase, the commission noted.
Duke Energy Kentucky, in applying for the rate increase, cited an inadequate rate of return on investment, recovery of costs related to the acquisition of the entirety of the East Bend power plant near Rabbit Hash in Boone County, recovery of storm restoration costs from Hurricane Ike in 2008, and costs related to the deployment of an advanced metering system, according to the commission.
To arrive at the final revenue figure, the commission said that it made numerous adjustments, including reducing the rate of return for utility shareholders to 9.725%, from the 10.3% requested by Duke Energy Kentucky – $ 2.46m.
Among other things, the commission said that it rejected certain proposals made by the company, including a proposal to allow customers to pay a set amount every month, independent of usage. The commission also said that it approved Duke Energy Kentucky’s environmental compliance plan and a related surcharge through which the utility recovers the cost of compliance, as permitted under state law.
As noted in the April 13 order, the 2018 Environmental Compliance Plan reflects environmental compliance costs at its only coal-fired generation facility, East Bend. The projects include “Project EB020290 Lined Retention Basin West,” and “Project EB020745 Lined Retention Basin East,” the commission said, adding that according to the company, the pollution control projects included in the 2018 Plan amendment are necessary for Duke Energy Kentucky to comply with the Federal Clean Air Act and other federal, state, and local regulations that apply to coal combustion wastes and by-products from facilities utilized for the production of energy from coal.