Kentucky Power appeals Kentucky PSC fuel case decision

FRANKFORT, Ky., Feb. 23, 2015 – Kentucky Power has filed an appeal in Franklin County Circuit Court challenging a decision by the Kentucky Public Service Commission that deemed about $54 million in fuel costs as unreasonable.

The appeal was filed Feb. 18, 2015. It seeks to reverse the Commission’s order issued Jan. 22, 2015, and also address suggestions that Kentucky Power was misleading in some of its filings with the agency regarding purchase of half interest in the Mitchell Power plant in Moundsville, West Virginia.

“The language in the order was particularly disappointing because it questioned the integrity of the information that we provide the Kentucky Public Service Commission,” said Kentucky Power President and COO Greg Pauley. “Throughout Kentucky Power’s long history in Kentucky, we have always been open, transparent and forthright in our dealings with the Commission. We take an oath of truth that we abide by whether in front of the Commission or in written material we submit and would never intentionally mislead the Commission or any government agency.”

In its Jan. 22 order, the Public Service Commission directed Kentucky Power to refund to customers $13 million in fuel costs collected during the first four months of last year through the Fuel Adjustment Clause (FAC). Those refunds were to be delivered this year through credits on customer bills in February, March, April and May. Kentucky Power also was directed to forego additional collection of an estimated $41 million in fuel costs incurred through May.

The fuel costs disallowed by the Kentucky PSC resulted from having both the Mitchell power plant and Big Sandy No.2 in Louisa, Kentucky, in operation at the same time. Costs of operating both generation units will no longer be an issue after Big Sandy Unit 2 is retired later this year. The Commission last year approved Kentucky Power’s purchase of half the Mitchell plant to meet both customer needs and EPA demands.

The Kentucky Public Service Commission allows Kentucky Power and other electric utilities to pass fuel costs through to customers. This pass through is on a dollar-for-dollar basis and reflects actual fuel and purchased power costs. Kentucky Power does not earn a profit on the FAC. The FAC is reviewed about every six months by the Commission and adjusted accordingly. At least two other electric providers in Kentucky use the same Commission-authorized methodology, which is based on Federal Energy Regulatory Commission guidance. 

“By filing this appeal, we will be able to defend and support our position and our right to recover costs that the Commission has allowed us and other Kentucky utilities to recoup for decades,” Pauley said. “The operation of both plants actually allowed Kentucky Power customers to realize $9.9 million in net cost benefits during the cold spells of 2014. Without both generating stations, Kentucky Power would not have been able to generate enough electricity to serve our customers. The Commission affirmed in its order that our purchase of the Mitchell plant represents the lowest reasonable cost alternative for our customers in replacing Big Sandy Unit 2. When faced with making such tough decisions, we always make them with the best interests of our customers in Eastern Kentucky in mind.”

Kentucky Power, with headquarters in Frankfort, Ky., provides service to approximately 172,000 customers in all or part of 20 eastern Kentucky counties. It is a unit of the AEP system, one of the largest electric utilities in the United States, with more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765 kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined.

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