Kentucky Attorney General Russell Coleman is urging state regulators to reject a proposed 12.3% rate increase from Kentucky Power, calling it a move that benefits shareholders at the expense of everyday customers.
In a post-hearing brief filed Tuesday, the attorney general’s office asked the Kentucky Public Service Commission (PSC) to take what it described as an “extremely rare” step: deny the utility’s rate request outright. Coleman’s office argued there is no evidence Kentucky Power — which serves about 165,000 customers across 20 eastern Kentucky counties — would be harmed if the increase is not approved.
“For generations, outsiders have taken advantage of Eastern Kentucky in attempts to sap its resources and drain families’ money,” Coleman said in a statement. “It’s my duty to promote affordable, reliable energy in Kentucky, and another rate increase for Kentucky Power won’t advance that goal. I hope the Public Service Commission joins me on the side of Kentucky families and holds Kentucky Power accountable.”
State attorneys criticized the investor-owned utility for repeatedly seeking rate hikes despite remaining profitable and despite its parent company, American Electric Power Co. Inc., posting record earnings. The brief cited public comments heard by the PSC during meetings in Pikeville, Hazard and Ashland over the past two months, which Coleman’s office said show customers cannot absorb additional increases.
“Those accounts included examples of individuals who desperately want to live in Eastern Kentucky, but who are considering leaving based simply on the cost of electric service in the area,” the brief stated. “This is unacceptable.”
The attorney general’s office said Kentucky Power plays an outsized role in shaping quality of life in some of the state’s poorest regions and has failed to demonstrate how it plans to contribute to the long-term economic health of its service territory.
“If AEP wants to continue to operate in this service territory, then it must share in the good and the bad, the risk and the reward, and not solely burden the ratepayers with the problems of the area,” the brief said. “What is Kentucky Power’s plan to contribute to the economic viability of its service territory? It does not seem to have one.”
Kentucky Power has sought multiple rate increases in recent years. In 2020, it requested a 13.6% hike totaling $70.1 million and was granted a 10.2% increase of $52.4 million. Three years later, the company sought another 13.6% increase worth nearly $94 million. After appealing a lower PSC-approved amount, the increase ultimately rose to $74.2 million, or 10.7%.
By 2021, concerns about the company’s financial future and its impact on eastern Kentucky customers prompted the PSC to open an investigation. More recently, Kentucky Power added a securitization surcharge to customer bills to cover costs tied to retiring a coal-fired plant in Louisa and reversed a prior PSC order requiring divestment from a West Virginia coal plant — moves that further increased bills.
In the current case, Kentucky Power initially asked for a 14.9% rate increase but later reached a settlement with interveners to lower the request to 12.3% spread over three years. Last week, the company sought permission to begin charging higher rates before the PSC issues a final ruling.
Under the settlement, the average residential customer using 1,210 kilowatt-hours per month would see bills rise by about $26.40 by 2028. That includes an 8.2% increase, or $17.58, this year, followed by smaller increases in 2027 and 2028.
Coleman’s office also raised concerns about the proposed tiered rate structure, arguing it could disproportionately affect low-income households in Appalachian Kentucky, where poorly insulated homes often lead to higher winter energy use. Wealthier customers with larger homes could benefit at the expense of lower-income families, the office said.
Instead, the attorney general’s office suggested expanding budget billing programs to help customers manage seasonal spikes by spreading costs evenly throughout the year.
Coleman is also calling on the PSC to order an independent management audit of Kentucky Power. If regulators approve any increase, the office said it should be significantly lower than what the company has requested.
“Some of the high costs experienced by ratepayers are likely the result of Kentucky Power’s poor decisionmaking,” the brief concluded. “If AEP believes the territory is not sufficient for it to achieve its profit goal, then perhaps it is time to let someone else provide the people of Eastern Kentucky with electric service.”
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