Who’s protecting the Kentucky energy consumer?

This week, Louisville Gas and Electric Company and Kentucky Utilities Company told the world they needed money. They trumpeted the fact that environmental regs on coal are going to cost them a mint or two, to the tune of $2.5 billion. In fact, they plan to increase rates for power consumers by nearly 19 percent to cover those costs. (The fine print tells you that will occur slowly over the next five years, not be implemented the moment of approval.)

And cleaning up coal can be expensive: Scrubbers and baghouse systems don’t come cheap. ($1.4 billion for scrubbers and over a million for baghouse systems.)

Paul W. Thompson, senior vice president of energy services for the two utilities stated, "While costs continue to increase as a result of the federal EPA regulations, we are committed to providing our customers a secure energy supply in the least-cost manner. We have carefully studied the options to meet the stricter regulations and have developed a compliance plan that will least impact our customers and the Commonwealth.”

Thompson went on to hedge that statement, however, by explaining that a number of utilities will be hit with these regs at the same time, leading to high demand for materials, which could increase costs higher than their original estimates.

The rate announcement led to a small angry explosion by Kentucky governor Steve Beshear, who released an answering statement of his own in which he lamented “that too many Kentucky families are still struggling in this tough economy” so he’s just darn “disappointed that the federal government’s war on coal, which I am fighting against every single day, is now threatening to cause drastic utility rate increases.”

In fact, he called the regulations “mandates” and labeled them “unfair” and “unfunded,” along with “devastating” to the state’s coal industry.

The utilities say they cannot help but pass on these costs from these regulations, but they are keeping the costs as low as possible for consumers. The government says that these regulations are necessary to fight air pollution and global warming and allow those consumers a better quality of life, along with helping health, allergy and asthma issues. The governor says that he’s protecting the consumer by fighting those air pollution mandates---a fight no one believes he’s going to win. Can the consumer be equally protected by all?

And even the Kentucky Coal Association has been in this tussle over customer interest.

See, this fight isn’t new. Those regulations have been on the books, with the due date coming, for quite awhile. And coal-heavy utilities have been weighing just what to do with their newly expensive (formerly cheap) generation sources that rely on those chunky black squares. But, no one really saves for this sort of thing; that’s what rate increases are for.

In fact, just last month the same two utilities discussed here hinted that they might switch some of their older coal plants over to natural gas to save money for that consumer, a move that brought another angry response, this time from Kentucky Coal Association president Bill Bissett who stated a firm belief that it’s still much cheaper to retrofit coal than to switch to gas and that he believes coal power will be around for “generations to come.”

The current release on the expected rate increase doesn’t include the direct statement that natural gas may take over the plants they want to close, but it does reinforce the concept that closing three plants is more than possible, it’s highly probably.
In the end, the regulations will not be removed, despite the governor’s protest. And, the utilities will likely get a percentage (or all) of what they are requesting for a rate increase. (For 2012, that’s about 2 bucks a month per bill.)

I’m curious, though, about where the Kentucky power consumer falls in this equation. Does he feel protected by the utilities, the feds, the governor or the association? And, does he want to fork over an extra 2 bucks a month for cleaner air to breathe, or does he think the costs should be born by stakeholders and not him?

One local TV channel’s website covered the rate news and quoted the company spokesman heavily as pointing a finger at the government and literally saying they were “forced” to do this and “we don’t have a choice.” But, I’m not sure their consumers believe that.

One comment on the article noted that “upgrades” to his own house and car came out of his own pocket. So, he didn’t understand why those costs were being passed along to him. Also in the comments section: pleas for better customer service if the rates go up, for executives of the utilities to take a pay cut rather than upping the rates on struggling consumers, and confusion about why these costs don’t come out of the utility’s profits

So far, it seems, the utilities will bear the brunt of consumer anger about being so thoroughly protected, not the government, a position I’m sure the utilities were hoping desperately to avoid.