FROM THE KENTUCKY LANTERN
A substation for electric utility Kentucky Power in Letcher County. (Kentucky Lantern photo by Liam Niemeyer).
Kentucky’s utility regulator and the Kentucky attorney general will appeal the dismissal of a complaint they brought before the Federal Energy Regulatory Commission (FERC) that alleged Kentucky Power customers were unfairly covering costs of transmission projects in other states.
‘The Federal Energy Regulatory Commission last week dismissed the complaint brought this year by the Kentucky Public Service Commission (PSC) and Republican Kentucky Attorney General Russel Coleman against American Electric Power and its subsidiaries including Kentucky Power, which serves 160,000 customers in 20 Eastern Kentucky counties.
The state utility regulator and Coleman had argued in a complaint filed in March that Kentucky Power customers were subsidizing — to the tune of $66 million from 2017 through 2022 — electricity transmission projects “hundreds of miles away” because of a cost-sharing arrangement for such investments across seven states. The arrangement included various AEP subsidiary utilities that are part of the PJM regional power grid.
Kentucky Power customers pay among the highest average residential utility bills in the state, as both the Kentucky PSC and attorney general noted.
The transmission projects under scrutiny are referred to as supplemental or self-planned projects, or local transmission upgrades or investments that utilities individually plan within their own footprint. Critics have argued in recent years such projects lack proper oversight from state regulators and FERC to determine their necessity and cost-effectiveness.
FERC, which regulates interstate transmission and wholesale electricity markets, in its order dismissed the complaint because the attorney general and the state regulator failed to establish the cost-sharing arrangement for supplemental projects was “in a manner that is unjust and unreasonable or unduly discriminatory or preferential.”
Kentucky Public Service Commission Chair Angie Hatton and AG Coleman told the Lantern both parties plan to appeal the dismissal.
“Because we perceive a need to protect Kentucky Power ratepayers from longstanding unfair transmission costs, we do plan to file a motion for rehearing at FERC,” Hatton said in a statement to the Lantern.
Coleman in a statement through a spokesperson, said, “We’ll keep fighting this unfair system that has taken advantage of Kentucky families for far too long. My responsibility as Attorney General is to promote affordable and reliable energy for Kentuckians, and that’s exactly what we’ll continue to do.”
Emails and a call to a press office for American Electric Power asking about the complaint dismissal were not returned.
Claire Wayner, a senior associate at the nonpartisan think tank RMI that focuses on energy policy, co-wrote a report last year that targeted the “regulatory gap” among state utility regulators, FERC and regional power grid operators that allow such supplemental projects to receive little oversight.
Wayner told the Lantern the complaint from Kentucky officials is an example of how “a state is trying to take action to close the regulatory gap.”
“They can make one-off complaints to FERC,” Wayner said. “What I would like to see to really comprehensively close the regulatory gap is for PJM and its transmission owners and its states collectively to take actions to implement regional-first planning and ensure that these supplemental projects are really fully being integrated” to benefit ratepayers.
She said such “regional-first planning” would have utilities submit local transmission infrastructure needs to regional power grid operators such as PJM with such operators identifying what local projects are needed in a region. She pointed to a regional power grid operator in New England that will independently review utilities’ proposed local projects.
“States can feel more confident in either issuing permits for these projects or denying permits for these projects based on information they get from the independent reviewer on things like the prudence of these investments, cost estimates, whether these assets actually need to be replaced or could have been designed in a more efficient manner — that sort of thing,” Wayner said.
