The first bill to reach Kentucky Gov. Andy Beshear’s desk in this legislative session is aimed at giving Kentuckians more time to pay utility bills expected to rise because of a spike in natural gas prices during the recent extreme cold.
Sen. Phillip Wheeler, R-Pikeville, told lawmakers this week he filed Senate Bill 172 after hearing from utilities that their fuel costs could increase monthly residential utility bills by $30 to $100.
The spot price for natural gas during Winter Storm Fern — the unofficial name for the expansive January winter storm that chilled North America as far south as northern Mexico — surged to a new record amid cold temperatures and high demand to fuel gas-fired combustion turbines.
SB 172 would codify utilities’ ability to spread out over a longer period the billing of ratepayers for the higher fuel costs once the utilities receive approval from the Public Service Commission (PSC). The PSC already has the discretion to extend the timeframe for collecting fuel costs from customers, a PSC spokesperson said.
Wheeler, speaking to the House Natural Resources and Energy Committee, said: “This would simply just give the PSC another tool to help out consumers instead of having to collect that all at once in the month following the expenditure. This allows them to spread it out over a number of months, so that you know it’s not hitting them as hard in the pocketbook.”
Rep. Jim Gooch, R-Providence, the chair of the committee, told fellow lawmakers that utilities would have to make the request “pretty soon” to cover the upcoming fuel costs. The bill has an emergency clause, meaning it would go into effect immediately if it becomes law.
The bill has moved relatively quickly through the legislature since being filed on Feb. 9. The Kentucky House of Representatives approved the bill Wednesday by a vote of 95-0, sending it to the desk of Democratic Kentucky Gov. Andy Beshear for his consideration. A spokesperson for Beshear did not provide a response on whether the governor supports the bill.
Fuel costs are collected by utilities through a mechanism called the fuel adjustment clause, a provision that allows utilities to automatically pass through to ratepayers the changing costs of fuel, typically coal or natural gas in Kentucky. Utilities do not earn a profit from collected fuel costs.
The PSC regularly reviews utilities’ use of the fuel adjustment clause to make sure only reasonable costs are being passed on to ratepayers. The PSC can order a refund to ratepayers if it determines a utility has overcharged for fuel.
Sheri Mahan, a spokesperson for the Public Service Commission, told the Lantern the regulator already has the discretion to extend the timeframe over when the costs of fuel are collected through the fuel adjustment clause. She said the commission has not been consulted so far on bills filed by the legislature that involve the regulator.
Nick Comer, a spokesperson for electric utility East Kentucky Power Cooperative, which generates power for a number of nonprofit electric distribution cooperatives in the state, in an emailed statement said natural gas prices “often were very high” during Winter Storm Fern, the market price for gas about 19 times higher than normal at one point.
“The overall cost of fuel was driven up by high natural gas prices, along with the extended periods over which EKPC operated its gas units to provide reliable power and keep heat flowing,” Comer said.
Comer said in anticipation of SB 172’s passage, EKPC is planning to cap the amount of fuel costs collected each month. He thanked Wheeler, the legislature and the governor for their work to move the legislation.
“The balance of fuel costs will be collected in future months, helping residents and business owners better manage their monthly power bills,” Comer said.
Sarah Lynch, a spokesperson for investor-owned electric utility Kentucky Power, in an emailed statement, said the utility has asked the PSC for permission to defer $5 million in fuel costs from Janauary to help manage impacts to utility bills. She said the utility also saved $4.8 million in fuel cost in January by having existing power plants ready and available.
She said tools such as “extended recovery periods — whether under existing authority or potential statutory changes — are designed to help reduce short-term bill volatility for customers while ensuring fuel costs are reviewed through established regulatory oversight.”