LG&E/KU: $500 million savings on environmental upgrades will cut planned rate increases by a third

LOUISVILLE, Ky. (Nov. 9, 2012) — LG&E/KU announced Thursday that they expect to save more than $500 million for the environmental upgrade projects previously approved by the Kentucky Public Service Commission to address more stringent Environmental Protection Agency regulations.

Having the Environmental Cost Recovery (ECR) mechanism, coupled with the timely actions of the Kentucky Public Service Commission, enabled Louisville Gas and Electric Co. and Kentucky Utilities Co.  to receive approval for the projects earlier than other companies. LG&E and KU were able to significantly lower their cost estimates by being one of the first utilities in the nation to begin purchasing additional clean-coal technology equipment designed to further reduce emissions and meet the latest round of environmental regulations.

When the environmental compliance costs peak in 2016, LG&E had anticipated residential customers’ bills increasing 18.3 percent. LG&E now expects that increase to be 12.8 percent. Similarly, KU expected residential customers’ bills to rise 9.7 percent by 2016 and now that increase is expected to be 6.6 percent.

Most of the capital savings are from efficient procurement practices that resulted in lower-than-anticipated installation and equipment costs for scrubbers that will reduce sulfur dioxide emissions at Mill Creek and less expensive fabric-filter baghouses used to reduce particulate and mercury emissions.

Additionally, LG&E and KU expect to save about 45 percent on the operations and maintenance projected increases, which equates to about $59 million annually starting in 2016.

“Receiving timely approvals from the Kentucky Public Service Commission and the other regulatory agencies allowed our employees to negotiate and secure the most economic deals possible. As a result, customers will benefit from the lower cost increases for these environmental compliance requirements,” said Victor A. Staffieri, chairman, CEO and president of LG&E and KU Energy. “We realize that customers’ bills are still increasing, but in these tough economic times, it’s nice to be able to pass along some savings to our customers.”

The lower costs mean that by 2016, LG&E residential customers using 1,000 kWh per month can now expect to save about $56 annually on the portion of the bill for environmental compliance, while KU residential customers using the same amount can now expect to save nearly $30 annually compared to the original plan.