Investing in Cleaner Electricity for the Future
As was announced in December 2011, new environmental regulations are requiring significant changes to our power plants. Last year, we filed a proposal with the Kentucky Public Service Commission (KPSC) outlining our plan to comply with the new laws. In December, the KPSC approved a unanimous settlement agreement in the environmental cost recovery case for LG&E and KU.
LG&E's Environmental Investment
LG&E will invest $1.4 billion in environmental upgrades to meet the new, stricter U.S. Environmental Protection Agency (EPA) regulations.
LG&E will modernize the flue gas desulfurization systems, better known as scrubbers, at its Mill Creek plant in Louisville, Ky. In addition, LG&E will install fabric-filter baghouse systems for increased particulate and mercury control on all units at Mill Creek and for Unit 1 at its Trimble County plant in Bedford.
The impact on LG&E residential customers is estimated to be an increase of 2.12 percent in 2012, growing to an increase of 18.34 percent in 2016. For an LG&E residential electric customer using 1,000 kilowatt hours (kWh) of electricity per month, this increase equals an estimated initial impact of $1.80 per month on the electric portion of your bill in 2012, with an estimated impact of $15.60 per month by 2016.
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LG&E will modernize the flue gas desulfurization systems, better known as scrubbers, at its Mill Creek plant in Louisville, Ky. In addition, LG&E will install fabric-filter baghouse systems for increased particulate and mercury control on all units at Mill Creek and for Unit 1 at its Trimble County plant in Bedford.
The impact on LG&E residential customers is estimated to be an increase of 2.12 percent in 2012, growing to an increase of 18.34 percent in 2016. For an LG&E residential electric customer using 1,000 kilowatt hours (kWh) of electricity per month, this increase equals an estimated initial impact of $1.80 per month on the electric portion of your bill in 2012, with an estimated impact of $15.60 per month by 2016.
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KU's Environmental Investment
KU will invest $896 million in environmental upgrades to meet the new, stricter U.S. Environmental Protection Agency (EPA) regulations.
KU will install fabric-filter baghouse systems for increased particulate and mercury control on all units at its Ghent plant near Carrollton and on Unit 3 at its E.W. Brown plant near Harrodsburg. Brown will also be converting its current coal ash pond to a dry storage landfill.
While E.W. Brown Units 1 and 2 will continue to operate as always, the installation of additional emission controls will be deferred until KU gets a clearer picture of pending federal environmental regulations.
The impact on KU residential customers is estimated to be an increase of .89 percent in 2012, growing to an increase of 9.65 percent in 2016. For a KU residential customer using 1,000 kilowatt hours (kWh) of electricity per month, this increase equals an estimated initial impact of 69 cents per month on the electric portion of your bill in 2012, with an estimated impact of $7.47 per month by 2016.
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KU will install fabric-filter baghouse systems for increased particulate and mercury control on all units at its Ghent plant near Carrollton and on Unit 3 at its E.W. Brown plant near Harrodsburg. Brown will also be converting its current coal ash pond to a dry storage landfill.
While E.W. Brown Units 1 and 2 will continue to operate as always, the installation of additional emission controls will be deferred until KU gets a clearer picture of pending federal environmental regulations.
The impact on KU residential customers is estimated to be an increase of .89 percent in 2012, growing to an increase of 9.65 percent in 2016. For a KU residential customer using 1,000 kilowatt hours (kWh) of electricity per month, this increase equals an estimated initial impact of 69 cents per month on the electric portion of your bill in 2012, with an estimated impact of $7.47 per month by 2016.
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Impact on LG&E Customers' 2012 Electric Bills
Beginning in March 2012, the way the Environmental Surcharge — also referred to as Environmental Cost Recovery — is calculated will change for some customers. As a result of the settlement in the regulatory proceeding, there are now two methods for calculating the Environmental Surcharge.
The method for calculating the Environmental Surcharge for the majority of customers (Group 1 in the chart below) remains unchanged and is based on what we refer to as "Total Revenues." On your bill, Total Revenues include the Basic Service Charge, the Energy Charge, the Electric Demand-Side Management (DSM) charge and the Fuel Adjustment. Group 1 includes customers who are served under the Residential Service (RS), Volunteer Fire Department (VFD) and Lighting rate types.
The method for calculating the Environmental Surcharge for customers in Group 2 in the chart below will be based on non-fuel revenues, which we refer to as "Net Revenue." On your bill, Net Revenue includes the Basic Service Charge, the Energy Charge less the fuel cost component, the Demand Charge (if there is one) and Electric Demand-Side Management (DSM) if the rate type is charged the DSM. Group 2 includes customers who are served under the General Service (GS), Power Service (PS), Time-of-Day (TOD), Retail Transmission Service (RTS) and Special Contracts rate types.
While the Environmental Surcharge billing factor for customers in Group 2 will appear to be higher, it is only applied to the non-fuel costs of the Electric Charges on the bill.
The chart below can help you plan for what to expect this year. We have listed the average increase to customers' 2012 electric bills based on the various rate types. You can find your specific rate type(s) on your bill.
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The method for calculating the Environmental Surcharge for the majority of customers (Group 1 in the chart below) remains unchanged and is based on what we refer to as "Total Revenues." On your bill, Total Revenues include the Basic Service Charge, the Energy Charge, the Electric Demand-Side Management (DSM) charge and the Fuel Adjustment. Group 1 includes customers who are served under the Residential Service (RS), Volunteer Fire Department (VFD) and Lighting rate types.
The method for calculating the Environmental Surcharge for customers in Group 2 in the chart below will be based on non-fuel revenues, which we refer to as "Net Revenue." On your bill, Net Revenue includes the Basic Service Charge, the Energy Charge less the fuel cost component, the Demand Charge (if there is one) and Electric Demand-Side Management (DSM) if the rate type is charged the DSM. Group 2 includes customers who are served under the General Service (GS), Power Service (PS), Time-of-Day (TOD), Retail Transmission Service (RTS) and Special Contracts rate types.
While the Environmental Surcharge billing factor for customers in Group 2 will appear to be higher, it is only applied to the non-fuel costs of the Electric Charges on the bill.
The chart below can help you plan for what to expect this year. We have listed the average increase to customers' 2012 electric bills based on the various rate types. You can find your specific rate type(s) on your bill.
| Customers' 2012 electric bills | |
| Rate Type | Avg. % increase |
| Residential (RS) | 2.17% |
| Volunteer Fire Department (VFD) | 2.17% |
| Lighting | 2.17% |
| General Service (GS) | 2.57% |
| Power Service (PS) | 2.35% |
| Time-Of-Day (TOD) | 2.08% |
| Retail Transmission Service (RTS) | 1.95% |
| Special Contracts | 1.91% |
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Impact on KU Customers' 2012 Electric Bills
Beginning in March 2012, the way the Environmental Surcharge — also referred to as Environmental Cost Recovery — is calculated will change for some customers. As a result of the settlement in the regulatory proceeding, there are now two methods for calculating the Environmental Surcharge.
The method for calculating the Environmental Surcharge for the majority of customers (Group 1 in the chart below) remains unchanged and is based on what we refer to as "Total Revenues." On your bill, Total Revenues include the Basic Service Charge, the Energy Charge, the Electric Demand-Side Management (DSM) charge and the Fuel Adjustment. Group 1 includes customers who are served under the Residential Service (RS), Volunteer Fire Department (VFD), Lighting and All Electric Schools (AES) rate types.
The method for calculating the Environmental Surcharge for customers in Group 2 in the chart below will be based on non-fuel revenues, which we refer to as "Net Revenue." On your bill, Net Revenue includes the Basic Service Charge, the Energy Charge less the fuel cost component, the Demand Charge (if there is one) and Electric Demand-Side Management (DSM) (DSM) if the rate type is charged the DSM. Group 2 includes customers who are served under the General Service (GS), Power Service (PS), Time-of-Day (TOD), Retail Transmission Service (RTS) and Fluctuating Load Service (FLS) rate types.
While the Environmental Surcharge billing factor for customers in Group 2 will appear to be higher, it is only applied to the non-fuel costs of the Electric Charges on the bill.
The chart below can help you plan for what to expect this year. We have listed the average increase to customers' 2012 electric bills based on the various rate types. You can find your specific rate type(s) on your bill.
close
The method for calculating the Environmental Surcharge for the majority of customers (Group 1 in the chart below) remains unchanged and is based on what we refer to as "Total Revenues." On your bill, Total Revenues include the Basic Service Charge, the Energy Charge, the Electric Demand-Side Management (DSM) charge and the Fuel Adjustment. Group 1 includes customers who are served under the Residential Service (RS), Volunteer Fire Department (VFD), Lighting and All Electric Schools (AES) rate types.
The method for calculating the Environmental Surcharge for customers in Group 2 in the chart below will be based on non-fuel revenues, which we refer to as "Net Revenue." On your bill, Net Revenue includes the Basic Service Charge, the Energy Charge less the fuel cost component, the Demand Charge (if there is one) and Electric Demand-Side Management (DSM) (DSM) if the rate type is charged the DSM. Group 2 includes customers who are served under the General Service (GS), Power Service (PS), Time-of-Day (TOD), Retail Transmission Service (RTS) and Fluctuating Load Service (FLS) rate types.
While the Environmental Surcharge billing factor for customers in Group 2 will appear to be higher, it is only applied to the non-fuel costs of the Electric Charges on the bill.
The chart below can help you plan for what to expect this year. We have listed the average increase to customers' 2012 electric bills based on the various rate types. You can find your specific rate type(s) on your bill.
| Customers' 2012 electric bills | |
| Rate Type | Avg. % increase |
| Residential (RS) | 1.73% |
| Volunteer Fire Department (VFD) | 1.73% |
| Lighting | 1.73% |
| All Electric Service (AES) | 1.73% |
| Rate General Service (GS) | 2.25% |
| Rate Power Service (PS) | 1.92% |
| Rate Time-Of-Day (TOD) | 1.66% |
| Rate Retail Transmission Service (RTS) | 1.56% |
| Rate Fluctuating Load Service (FLS) | 1.36% |
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Commonly Asked Questions
What impact will the increase in the Environmental Surcharge have on my overall bill?
How is the Environmental Surcharge billing factor determined for each customer?
Why are customers on different rate types being impacted differently?
Why do I see both the RS Rate Type and a GS Rate Type on my bill?
What are LG&E and KU doing to assist customers who are experiencing difficulty paying their bills?
Since natural gas is falling in price, why don't LG&E and KU switch to gas as their primary fuel source?
Renewable energy — from wind and solar — has no fuel cost and no emissions. Why can't LG&E and KU use wind power on windy days and solar power on sunny days and use coal only as needed?
Can't LG&E and KU build zero emissions generating plants?
Are coal-fired power plants the primary source of most of the mercury found in the environment?
What if we all do our part to be more energy efficient? Won't that eliminate the problem?
What if I want to install solar panels — or some other generation source — at my home. Can I do that?
How do LG&E's and KU's rates compare to those in the region and in the U.S.?
What impact will the increase in the Environmental Surcharge have on my overall bill?
The increase in the Environmental Surcharge will impact each customer differently. Much depends on your individual usage (and for some rate types, your electric demand) and the rate type for your account. The percentage used in the calculation (referred to as a "billing factor") that determines the amount you see on your bill each month will continue to adjust as project construction progresses.
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How is the Environmental Surcharge billing factor determined for each customer?
There are two Environmental Surcharge billing factors based on various Rate Types. You can find your Rate Type on your bill.
Group 1
Customers in Group 1 have an Environmental Surcharge ("billing factor") that is based on what we refer to as a total revenue calculation and is applied to total revenues.
Group 1 includes customers on the Residential Service (RS) Rate Type, the All Electric Schools (AES) Rate Type for KU customers, customers on the Volunteer Fire Department (VFD) Rate Type and customers with special outdoor lights that are served under our Lighting Rate Type.
Group 2
Group 2 includes customers who are served by our General Service (GS) Rate Type, the Power Service (PS) Rate Type, the Time-Of-Day (TOD) Rate Type, and the Retail Transmission Service (RTS), Special Contracts and Fluctuating Load Service (FLS) rate types.
The Group 2 billing factor is based on what we refer to as a non-fuel revenue calculation and is applied to non-fuel revenues.
The chart below shows the average percentage impact on customers' bills for 2012 based on the customer's Rate Type:
Summary Impact of All ECR Plans for 2012
* Actual customer impact is dependent on an individual customer's load factor and usage.
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Group 1
Customers in Group 1 have an Environmental Surcharge ("billing factor") that is based on what we refer to as a total revenue calculation and is applied to total revenues.
Group 1 includes customers on the Residential Service (RS) Rate Type, the All Electric Schools (AES) Rate Type for KU customers, customers on the Volunteer Fire Department (VFD) Rate Type and customers with special outdoor lights that are served under our Lighting Rate Type.
Group 2
Group 2 includes customers who are served by our General Service (GS) Rate Type, the Power Service (PS) Rate Type, the Time-Of-Day (TOD) Rate Type, and the Retail Transmission Service (RTS), Special Contracts and Fluctuating Load Service (FLS) rate types.
The Group 2 billing factor is based on what we refer to as a non-fuel revenue calculation and is applied to non-fuel revenues.
The chart below shows the average percentage impact on customers' bills for 2012 based on the customer's Rate Type:
Summary Impact of All ECR Plans for 2012
| LG&E | KU | |
| 2012 | 2012 | |
| Group 1 | ||
| ECR Billing Factor (Total Revenue) | 2.17% | 1.73% |
| % increase in bill | ||
| Rate RS, AES, Lighting | 2.17% | 1.73% |
| Group 2 | ||
| ECR Billing Factor (Net Revenue)* | 3.44% | 3.14% |
| % increase in bill | ||
| Rate GS | 2.57% | 2.25% |
| Rate PS | 2.35% | 1.92% |
| Rate TOD | 2.08% | 1.66% |
| Rate RTS | 1.95% | 1.56% |
| Rate FLS | N/A | 1.36% |
| Special Contracts | 1.91% | N/A |
* Actual customer impact is dependent on an individual customer's load factor and usage.
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Why are customers on different rate types being impacted differently?
In addition to usage and demand differences among customers, the settlement agreement includes a different way of calculating the Environmental Surcharge based on Rate Type.
LG&E and KU Customers Served Under the RS, VFD, AES and Lighting Rate Types
The Environmental Surcharge billing factor for the vast majority of our residential customers and other customers — those classified in Group 1 in the chart above — is unchanged. It continues to be based on what we refer to as a total revenue calculation and is applied to total revenues.
LG&E and KU Customers Served Under the GS, PS, TOD, RTS, FLS and Special Contracts Rate Types
Customers with rate types listed in Group 2 on the chart above now have a billing factor that is based on what we refer to as a non-fuel revenue calculation and is applied to non-fuel revenues.
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LG&E and KU Customers Served Under the RS, VFD, AES and Lighting Rate Types
The Environmental Surcharge billing factor for the vast majority of our residential customers and other customers — those classified in Group 1 in the chart above — is unchanged. It continues to be based on what we refer to as a total revenue calculation and is applied to total revenues.
LG&E and KU Customers Served Under the GS, PS, TOD, RTS, FLS and Special Contracts Rate Types
Customers with rate types listed in Group 2 on the chart above now have a billing factor that is based on what we refer to as a non-fuel revenue calculation and is applied to non-fuel revenues.
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Why do I see both the RS Rate Type and a GS Rate Type on my bill?
Residential Customers
If you are a residential customer with a second meter that serves an outdoor building, you would see both Environmental Surcharge billing factors on your bill each month.
The service for your home would be provided under the Residential Service (RS) Rate Type and the Group 1 billing factors would be used to calculate your Environmental Surcharge. The service to your separately metered outdoor building is served under the General Service (GS) Rate Type and the Group 2 billing factors would be used to calculate your Environmental Surcharge for that portion of your bill.
Business Customers
If you are a business customer (served under one of our business Rate Types) and you have an outdoor light, you would have the Group 2 billing factor calculated for your business service and the Group 1 billing factor applied to your outdoor light service.
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If you are a residential customer with a second meter that serves an outdoor building, you would see both Environmental Surcharge billing factors on your bill each month.
The service for your home would be provided under the Residential Service (RS) Rate Type and the Group 1 billing factors would be used to calculate your Environmental Surcharge. The service to your separately metered outdoor building is served under the General Service (GS) Rate Type and the Group 2 billing factors would be used to calculate your Environmental Surcharge for that portion of your bill.
Business Customers
If you are a business customer (served under one of our business Rate Types) and you have an outdoor light, you would have the Group 2 billing factor calculated for your business service and the Group 1 billing factor applied to your outdoor light service.
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What are LG&E and KU doing to assist customers who are experiencing difficulty paying their bills?
As part of the settlement agreement, LG&E and KU provided an additional $500,000 in shareholder funds to the LG&E and KU Home Energy Assistance programs — $250,000 in December 2011 and the remaining $250,000 in January 2012. In addition, beginning January 2012, the Home Energy Assistance fund's per meter charge increased from 15 to 16 cents. These additional HEA funds will assist customers in need.
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Since natural gas is falling in price, why don't LG&E and KU switch to gas as their primary fuel source?
LG&E and KU have a fleet of natural gas peaking units, but not nearly enough to meet our customers' needs 24 hours a day, 7 days a week. The cost of coal for our existing coal units is still less expensive than today's natural gas when burned in peaking units.
We are planning to build (assuming we receive the necessary approvals) a new, more efficient natural gas-fired electric generation facility that will help us continue to meet our customers' energy needs.
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Renewable energy — from wind and solar — has no fuel cost and no emissions. Why can't LG&E and KU use wind power on windy days and solar power on sunny days and use coal only as needed?
We continuously evaluate new technologies to find the lowest cost means to provide electricity to our customers. To date, solar and wind technologies are more expensive than other means of generating power. The total cost to customers of wind and solar resources is greater than the cost of operating and maintaining our existing plants, and for new plants, wind and solar are currently more expensive than the projected cost of natural gas plants.
We have to serve our customers' needs at all hours of the day and night. Kentucky simply does not have consistently adequate wind or sun to allow these resources to operate even a high percentage of the time. Wind and solar are intermittent by nature and, therefore, need backup resources which further add to their total cost.
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We have to serve our customers' needs at all hours of the day and night. Kentucky simply does not have consistently adequate wind or sun to allow these resources to operate even a high percentage of the time. Wind and solar are intermittent by nature and, therefore, need backup resources which further add to their total cost.
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Can't LG&E and KU build zero emissions generating plants?
While zero emissions plants are an ideal, there currently are no economically viable technologies available for commercial operations.
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Are coal-fired power plants the primary source of most of the mercury found in the environment?
No. Volcanic eruptions, emissions from the oceans, forest fires and other natural sources are the largest emitters accounting for about a half of the global mercury emissions. Man-made sources make up the other half. The Electric Power Research Institute (EPRI) reports that 50% of global man-made emissions come from Asia; coal-fired power plants are a large portion of that. About 5% of the man-made global mercury emissions come from the U.S. About 2% of the global man-made emissions come from U.S. coal-fired power plant emissions. The chart below offers a visual depiction of the mercury issue.
Mercury emissions are a global problem (PDF, 93K)
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Mercury emissions are a global problem (PDF, 93K)
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What if we all do our part to be more energy efficient? Won't that eliminate the problem?
Energy efficiency programs are designed to reduce the level of peak energy demand or reduce the amount of energy consumed. A primary benefit of reducing the peak demand is to possibly delay the need for additional power plants.
However, we have an obligation to serve customers and, therefore, must plan our system to meet our customers' energy needs. While energy efficiency efforts likely won't eliminate the need for new generation capacity entirely, they can offset the need for new generation somewhat.
LG&E and KU offer a wide variety of energy efficiency programs. Learn more and sign up for the programs that interest you.
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However, we have an obligation to serve customers and, therefore, must plan our system to meet our customers' energy needs. While energy efficiency efforts likely won't eliminate the need for new generation capacity entirely, they can offset the need for new generation somewhat.
LG&E and KU offer a wide variety of energy efficiency programs. Learn more and sign up for the programs that interest you.
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What if I want to install solar panels — or some other generation source — at my home. Can I do that?
Certainly. LG&E and KU offer a Net Metering option for customers who want to generate renewable energy to power their homes or businesses.
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How do LG&E's and KU's rates compare to those in the region and in the U.S.?
LG&E and KU have rates that are well below the regional and national averages.
Retail Electric Rates: Currently and Historically Competitive (PDF, 67K)
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Retail Electric Rates: Currently and Historically Competitive (PDF, 67K)
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LG&E and KU to save more than $500 million on environmental construction projects
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