Kentucky’s two largest electric utilities are proposing to merge, and a former state utility regulator says the proposal needs a thorough examination.
Louisville Gas & Electric and Kentucky Utilities filed an application with the Kentucky Public Service Commission last week to merge.
The companies have asked the commission to approve the merger without any conditions.
Kent Chandler, a former PSC chairman, said the PSC should examine the proposal carefully to make sure it’s in the public interest.
“And so the argument that this should just be, effectively, rubber stamped is pretty significant,” he said. And I think it will raise some eyebrows both in communities, but also at the Public Service Commission.”
The companies say attaching conditions to their merger runs the risk of it falling apart.
Chandler served four years on the three-member commission, three of them as chairman. He said it would be unprecedented for the PSC to approve a merger without conditions.
“So the commission has for years, reviewed mergers like this and and in so far as they found them necessary, added conditions to them,” Chandler said. “And those conditions have always run the risk that the acquiring or acquired utility won't like them and decide not to move forward.”
“It's not obvious why the utilities think that this case is necessarily different, that the commission should effectively just defer to the wisdom and judgment of the utilities,” he said. But I find it hard to believe that they can provide examples of the commission approving a merger without conditions.”
Chandler also noted the likelihood that the companies will be seeking approval from a commission with five members instead of three.
Lawmakers approved Senate Bill 8, which would add two members, appointed by the governor and confirmed by the state Senate.
If Gov. Andy Beshear signs it, SB 8 will take effect immediately.
Liz Pratt, a spokeswoman for LG&E and KU, said the companies have been studying the potential benefit of merging, at the Kentucky PSC’s request.
The companies already operate in some respects as one, she said.
“Over the last 30 years, our utilities have been operating much like one company, adopting safety and reliability standards, best practices and policies,” she said. “We also run systems and functions in a highly integrated way.”
While monthly customer power usage is higher in KU’s territory than it is in LG&E’s, Pratt said its costs per kilowatt hour are roughly the same – around 13 cents. Customer rates, she said, would be addressed in a later case.
“We anticipate there will be opportunities to further unify rates and other aspects as a combined utility over time,” she said, “but the proposed merger would be largely, if not entirely, invisible to customers.”
LG&E and KU is a financial supporter of WEKU.
