FRANKFORT, Ky. (KT) - Kentucky Power Co. will refund more than $5 million to customers that it collected in excess of the actual costs of participating in a regional power market after an order through the Kentucky Public Service Commission.
In an order issued Friday, the PSC directed Kentucky Power to issue a credit to customers for the next 11 months. A typical residential customer will receive a credit of about $1.53 per month, or a total of $16.83 over the 11 months, with the amount varying depending on individual usage. The credits will begin appearing on customers’ statements starting in November.
Kentucky Power informed the PSC in August that for the 12 months ending June 30, it had collected about $5.17 million more than its actual cost of market participation. The company explained that the difference was the result of a one-time adjustment made by the Federal Energy Regulatory Commission to the cost calculations used in the regional power market in which Kentucky Power is a participant.
According to the PSC, regional power markets are designed to function in a way that provides electricity to customers at a cost that reflects supply and demand, with the lowest-cost power available being provided to customers.
Participation in the power market, known as the PJM Interconnection, involves complex transactions that reflect not only the costs of generating, selling and buying electric power, but also the cost of transmitting it under various conditions of supply and demand on the electric grid. Those costs are reflected in the amount Kentucky Power charges its customers.
A baseline amount is included in customer base rates with either an additional charge or credit, which are adjusted annually, to reflect costs above or below the baseline amount. In this instance, the last annual adjustment was set higher than the actual costs proved to be.
When it informed the PSC of the excess revenue, Kentucky Power argued against refunding it to customers, saying it should be retained to partially offset anticipated future increases in power market costs. But the PSC rejected that argument, saying Kentucky Power provided no evidence to support the claim that costs would increase, and ordered the excess revenue returned to customers.
Kentucky Power, which is headquartered in Ashland, serves around 175,000 customers in all or part of 20 eastern Kentucky counties.