PSC ACCEPTS SETTLEMENT IN LG&E, KU RATE CASES

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PSC Accepts Settlement in LG&E and KU Rate Cases
Rate increases will be smaller than requested 
FRANKFORT, Ky. (Dec. 20, 2012) - The Kentucky Public Service Commission (PSC) 
today accepted a settlement granting revenue adjustments that increase the base 
electric rates for customers of Kentucky Utilities Co. (KU) and the base 
electric and natural gas rates for customers of Louisville Gas and Electric Co. 
(LG&E).
The revenue adjustments are at levels agreed to by the two utilities, the 
Kentucky Office of Attorney General and other parties to the utilities' rate 
cases, among them the Kentucky Industrial Utility Customers Inc. (KIUC), Kroger 
Co., the Kentucky School Boards Association and advocates for low-income 
consumers.
In orders issued today, the PSC said that accepting the settlement is in the 
public interest because they result in a rates "consistent with those justified 
by our traditional rate-making analysis." The PSC found that the rates in the 
settlement are fair, just and reasonable. The new rates take effect on Jan. 1, 
2013.
Under the settlement agreement, the average monthly bill for a typical KU 
residential customer will increase by $5.16 (5.6 percent). A typical LG&E 
residential electric customer will see the average monthly bill increase by 
$4.25 (5 percent). The average monthly bill for an LG&E residential natural gas 
customer will increase by $5.57, a figure that includes a new surcharge for 
infrastructure improvements but does not take into account any fluctuations in 
the price of natural gas itself.
The settlement also includes an increase in the contribution company 
stockholders will make to help low-income customers, bringing it to $1 million 
per year.
LG&E has about 401,000 electric customers in nine counties in and around the 
Louisville area and 320,000 natural gas customers in 17 counties. KU has 
550,000 customers in 77 Kentucky counties.
The PSC conducted a hearing on the settlement on Nov. 27. It also conducted 
public meetings in Harlan, Lexington and Louisville to take comments from 
ratepayers.
The last rate adjustments for KU and LG&E came in July 2010.
KU and LG&E said the base electric rate increases are needed to pay for 
upgrades to electric transmission and distribution systems, improvements at 
electric generating facilities and the hiring of additional employees, 
particularly in their customer service operations. The companies also cited 
increased costs to comply with tighter federal cyber security standards.
The rate changes approved today do not include bill components that fluctuate 
on a regular basis, such as fuel cost adjustments and environmental costs on 
electric bills, surcharges related to energy efficiency programs or the 
commodity cost of natural gas.
In today's orders, the PSC addressed numerous public comments that objected to 
the proposed allocation of the increase for residential customers. The comments 
suggested that rather than dividing the increase between the fixed monthly 
charge and the usage-based charge, the entire increase should be in the usage 
charge.
An increase solely in the usage-based charge, the commenters contended, would 
reward those customers who have invested in energy efficiency and encourage 
other customers to make similar investments.
The PSC analyzed the effect of allocating the entire increase to the 
usage-based portion of the rate and found that it would have a negligible 
effect on that portion of the total bill that fluctuates with energy usage and 
is within the customer's control. Thus, the allocation in the settlement is 
unlikely to discourage investments in energy efficiency, the PSC said.
Details of the settlement agreement follow.
Rates for Kentucky Utility customers
*         Annual revenue for KU will increase by $51 million (4 percent), which 
is $31.4 million less than the $82.4 million requested by the utility.  As a 
result, the average monthly residential bill will increase by $5.16, rather 
than $7.41.
*         The monthly residential customer charge will go from the current 
$8.50 to $10.75, while the rate per kilowatt-hour (a kilowatt-hour is the 
amount of electricity used by a 100-watt bulb in 10 hours) will go from 6.987 
cents to 7.235 cents.
Rates for Louisville Gas & Electric electric customers
*         Annual revenue from electricity sales for LG&E will increase by $33.7 
million (3.7 percent), which is $28.4 million less than the $62.1 million 
requested by the utility.  As a result, the average monthly residential bill 
will increase by $4.25, rather than $7.25.
*         The monthly residential customer charge will go from the current 
$8.50 to $10.75, while the rate per kilowatt-hour will go from 7.242 cents to 
7.439 cents.
Provisions that affect LG&E natural gas customers 
*   Annual revenue from natural gas delivery for LG&E will increase by $15 
million (6.1 percent), which is $2.2 million less than the $17.2 million 
requested by the utility.  As a result, the average monthly residential bill 
will increase by $5.65, rather than $5.77. 
*   The monthly residential customer charge will go from the current 
$12.50 to $13.50, while the delivery charge will go from $2.24 to $2.64 per 
1,000 cubic feet of gas. 
*   The remaining $2.27 of the monthly increase will come through a 
surcharge to pay for replacement of aging natural gas infrastructure, including 
old and potentially unsafe connections between customer service lines and gas 
meters. Repair of those connections is currently a customer's responsibility. 
*   LG&E is proposing to take ownership of both the connections and the 
service lines, as well as responsibility for any necessary repairs or 
replacement. The surcharge will fund that program as well as LG&E's ongoing 
replacement of older natural gas distribution lines. 
*   Customers who replaced either their service lines or connections (also 
known as "risers") in 2011 or 2012 may apply for reimbursement to LG&E. 
*   LG&E also will reduce the threshold amount of gas commercial customers 
must consume in order to become eligible for transportation-only service that 
allows those customers to purchase gas from an independent third-party gas 
marketer.
Provisions that affect all KU and LG&E residential customers
*         Late payment charges will be reduced to 3 percent of the unpaid bill, 
down from the current 5 percent.
*         The due date for bills will be extended to at least 22 calendar days 
from the date the bill is issued, up from the current 12 days.
*         The company shareholder annual contribution to energy assistance 
programs for low-income customers will be increased by $350,000, bringing the 
total for both utilities to $1 million per year.
*         The monthly per-meter charge for residential customers that goes to 
fund the Home Energy Assistance Program for low-income customers will increase 
to 25 cents from the current 16 cents.
The settlement also calls for KU and LG&E to establish a program to help public 
schools with energy efficiency. The utilities must submit an application for 
that program to the PSC by the end of February 2013.
In addition to the Attorney General, KIUC, Kroger, and the Kentucky Schools 
Boards Association, parties to the cases included Lexington-Fayette Urban 
County Government; the Association of Community Ministries; and Community 
Action for Lexington-Fayette, Bourbon, Harrison and Nicholas Counties Inc. The 
last two organizations represent low-income utility customers. Gas marketers 
Hess Corp. and Stand Energy Corp. were intervenors in the LG&E case but were 
limited to certain issues.
Today's orders and other documents in the cases, as well as videos of the 
hearings and public meetings, are available on the PSC website, psc.ky.gov. The 
case numbers are 2012-00221 (KU) and 2012-00222 (LG&E).
The PSC is an independent agency attached for administrative purposes to the 
Energy and Environment Cabinet. It regulates more than 1,500 gas, water, sewer, 
electric and telecommunication utilities operating in Kentucky and has 
approximately 90 employees. 
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