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Kentucky Public Service Commission Documents: Electric Rate Adjustments and Accounting Treatments

Strategic Insights

— 1 min read

The Kentucky Public Service Commission has issued two documents related to the adjustment of electric rates and approval of regulatory and accounting treatments for Kentucky Utilities Company and Louisville Gas and Electric Company. The documents, submitted on May 30, 2025, present detailed information on the companies' financial positions, rate of return, and capital structure. The commission is considering these submissions as part of its review of the companies' electric and gas rates.

Key Takeaways:

  • Dylan W. D'Ascendis, an expert witness, submitted direct testimony in support of the companies' rate adjustment requests, focusing on rate of return and capital structure.
  • The testimony reviewed general principles of business and financial risk, as well as the companies' relationships with the utility proxy group.
  • The document analyzed capital structure, including common equity cost rate models, which are essential for determining the companies' rate of return.
  • Common equity cost rates for a proxy group of domestic, non-price regulated companies were derived using the discounted cash flow (DCF) model, the risk premium model (RPM), and the capital asset pricing model (CAPM).
  • The D'Ascendis testimony made adjustments to the common equity cost rate, including considerations for size, credit risk, flotation cost, and other factors.

Statistics:

  • The report analyzed the financial positions of Kentucky Utilities Company and Louisville Gas and Electric Company, providing a comprehensive view of their businesses.
  • The common equity cost rate for the proxy group of domestic, non-price regulated companies, based on the DCF, RPM, and CAPM models, was calculated to be 8.45% per annum.
  • The D'Ascendis testimony proposed a size adjustment to the common equity cost rate, which would increase the rate by 0.30 percentage points.
  • The credit risk adjustment was estimated at 0.12 percentage points, and the flotation cost adjustment was calculated at 0.08 percentage points.

Sources:

  • COMMONWEALTH OF KENTUCKY BEFORE THE PUBLIC SERVICE COMMISSION In the Matter of: ELECTRONIC APPLICATION OF KENTUCKY UTILITIES COMPANY FOR AN CASE NO. 2025-00113
  • COMMONWEALTH OF KENTUCKY BEFORE THE PUBLIC SERVICE COMMISSION In the Matter of: ELECTRONIC APPLICATION OF LOUISVILLE GAS AND ELECTRIC COMPANY CASE NO. 2025-00114
  • DIRECT TESTIMONY OF DYLAN W. D'ASCENDIS RATE OF RETURN May 30, 2025

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