Settlement reached in LG&E rate case:
No monthly fixed charge increases for residential ratepayers, company receives 63% of request, and lighting agreement finally allows Louisville Metro to convert all Metro street lights to LED
Jefferson County Attorney represents Louisville Metro in settlement that still requires review and approval by Kentucky Public Service Commission
Louisville Metro Government has agreed in principle to a settlement that would significantly reduce a proposed utility rate increase by Louisville Gas & Electric (LG&E). LG&E initially requested a revenue increase of $161.1 million for gas and electric. The stipulation entered into by all the parties to the case lowered that revenue requirement by nearly $60 million to $101.5 million, a decrease of 37%. Most importantly, LG&E agreed to no increase in the fixed customer charge, the amount customers pay regardless of how much energy they use. LG&E also agreed to a four-year “stay out” provision, which means that another rate increase cannot be implemented before July 1, 2025.
The stipulation keeps the residential rate increase for both electric and gas customers nearly identical to the system average. For LG&E electric customers, this is an average increase of 7% and for gas customers, an increase of 6.4%. LG&E is proposing an Economic Relief Surcredit Adjustment Clause, which will lower the rate impact during the first year of the increase. Because of this credit, the increase will only be 4.1% for electric and 5.9% for gas for the first year.
LG&E proposed a more than $6.00 per month increase to the basic service charge but has agreed to remove that as part of this agreement.
“Preventing an increase in the fixed customer charge was a clear message we heard from our citizens and city officials,” O’Connell said. “This agreement delivers a win for everyone in Jefferson County as no residential customers will see an increase in their minimum monthly charge. The four year “stay out” provision also allows our businesses to budget their energy expenses, still among the lowest in the nation, over multiple fiscal years. I hope that the PSC views this stipulation as fair, just, and reasonable and ultimately approves it.”
The settlement agreement’s effect on Metro’s streetlight program is profound. After years of trying to convert all the city’s old High Intensity Discharge (HID) fixtures to cheaper, more efficient, and environmentally sound Light Emitting Diode (LED) lights, this settlement allows Metro to meet its goal. In the past, the cost for LG&E to convert these fixtures was $7.37 per fixture per month for 60 months. During this proceeding, LG&E introduced a one-time conversion fee of $277.29. At Louisville Metro’s request during the settlement negotiations, LG&E has agreed to lower this one-time fee to $260.
This lower conversion fee, combined with the stipulation’s lowering of the lighting rate increase from 12% to 3.65%, will allow Louisville Metro to convert every streetlight that Metro currently pays for to LED lights within five years, contingent upon the ability to work with LG&E to hire the contractors and staff necessary for such a massive project. This major undertaking of converting nearly 22,000 streetlights from HID to LED can now be done for less per year than Metro currently pays for streetlights. At the end of this conversion process, Metro will be saving nearly $1.6 million per year on streetlights while the community benefits from environmentally friendly and efficient lighting. LG&E has agreed to work with Louisville Metro’s Department of Public Works on a plan to implement this in a timely fashion.
“This settlement agreement is a major win, both economically and environmentally for Louisville,” said Mayor Greg Fischer. “My administration has been trying for years to develop a plan to get all of our lighting up to modern standards with LED lights. Working with LG&E, this settlement allows us to reach this goal. With the other benefits of this settlement, Louisville Metro’s efforts in this case benefit all cities within Jefferson County and the rest of the LG&E service area.”
Other notable pieces of the settlement include:
Low-income customer support: LG&E’s shareholders contributions for low-income assistance (i.e., contributions to Association of Community Ministries, Inc. (“ACM”), Home Energy Assistance (“HEA”), and Wintercare) will be increased by the same percentages as the overall increases in revenue requirements resulting from these proceedings. This will mean an approximately 7% increase in shareholder commitments to these programs.
Advanced Meter Infrastructure (Smart Meters): LG&E will be allowed to begin conversion of their old meter infrastructure to smart meters. LG&E agrees to amortize the cost and benefits over a 15-year period and use the amortization of the regulatory assets and liabilities associated with the AMI project to address the up-front cost of and long-term benefit from the AMI project such that customers will not sustain an increase in the combined revenue requirements associated with implementing the AMI project. The cost and benefits credited to the customers will be determined in a future rate case when the five-year project is completed. There is no rate impact to the AMI project in this rate proceeding.
Additional lighting benefits: LG&E agrees to add a new LED offering to Rate LS to replace their current 100W HPS Cobra offering; commits to conduct a competitive bidding process for street lighting fixtures every five years and prior to the next rate case; and commits to have their information technology personnel work with their Louisville Metro counterparts to explore opportunities to allow street light outage notifications from Louisville Metro to flow more directly through to the Utilities.
Parties to the settlement include LG&E, Louisville Metro and Lexington, the office of Attorney General Daniel Cameron, Kentucky Industrial Utility Customers, Walmart, Kroger, Sierra Club, Metropolitan Housing Coalition, Kentuckians for the Commonwealth, Kentucky Solar Energy Society, United States Department of Defense and all other Federal Executive Agencies, and Kentucky Solar Industries Association, Inc.
One remaining issue is the LG&E’s proposed new Net Metering tariffs. The new tariffs were proposed in response to a change in state law that became effective January 1, 2020. This issue will be fully litigated before the PSC. The stipulation will be heard by the PSC in the already schedule rate hearing beginning Monday, April 26 at 9:00 AM. The proceedings can be followed at the PSC webpage, https://psc.ky.gov/.
Mayor Fischer and County Attorney Mike O’Connell are good stewards of taxpayers’ dollars. As in 2019, Louisville Metro joined forces with Lexington to share the costs of the intervention in this case and are splitting the services of former PSC Chair Jim Gardner and former PSC Staff Attorney Todd Osterloh of Sturgill, Turner, Barker & Moloney, PLLC.
A full version of the stipulation can be found at the PSC’s website at the following link: https://psc.ky.gov/pscecf/2020-00350/rick.lovekamp%40lge-ku.com/0419202…