COM. V. KENTUCKY PUBLIC SERVICE COMMISSION
GOVERNMENT: Public utility regulation; Environmental cost recoupment
PANEL: ROSENBLUM PRESIDING; DIXON, LAMBERT CONCUR
DATE RENDERED: 12/07/2007
At issue is the ability of Kentucky Power to recoup environmental surcharges it pays to two of its sister operating companies under the American Electric Power umbrella per an Interconnection Agreement in which it is required to make a capacity equalization payment which flows to two of these other power companies. Embedded within the capacity equalization payment are many generation related costs, one of which is the cost of environmental compliance equipment installed in the generating plants of those other two power companies.
KRS 278.183 provides a mechanism whereby electric utilities such as KP are entitled to immediately recover environmental compliance costs through a special environmental surcharge rather than having to wait until a general rate case to seek recoupment. Although the Public Service Commission is granted sweeping authority to regulate public utilities pursuant to the provisions of KRS Chapter 278, it is nonetheless a creature of statute and only has such powers as granted by the General Assembly. By any common understanding of that language, costs incurred by other utilities are not the costs of Kentucky Power. Here a reasonable interpretation of the statute is that KP’s costs include those costs embedded within its capacity equalization payment which relate to environmental compliance costs incurred by the out of state generating facilities. Accordingly, such costs are “its costs" and the Public Service Commission has made a reasonable interpretation of KRS 278.183, and the COA will give deference to that interpretation under the Chevron doctrine. Thus the COA found nothing in the statute which would limit its application to costs incurred at KP’s in-state physical facilities and over which the Commission has direct jurisdiction.