Kentucky utility regulators, the state’s attorney general and industrial companies are urging the Federal Energy Regulatory Commission to again reject American Electric Power’s proposed $2.65 billion sale of its Kentucky utility operations to Liberty Utilities.
The companies failed to show how the sale would affect transmission rates in AEP East’s seven-state area, the issue that prompted FERC to reject their original application in December, the Kentucky Public Service Commission and others said Thursday in a joint filing at FERC.
“Without knowing the adverse effects on zonal transmission rates, it is impossible for FERC and other parties to be able to determine whether the rate mitigation commitments actually offset or mitigate the adverse effects of the proposed transaction,” they said.
The AEP East transmission zone covers parts of Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia.
AEP and Liberty, a subsidiary of Algonquin Power & Utilities, face a contractual April 26 deadline to complete the deal, Julie Sloat, AEP president and CEO, said during a late-February earnings conference call. The companies asked FERC to approve it by March 31.
The main difference between the latest application and the one rejected by FERC is a recitation of how the deal would benefit retail electric rates, according to the Kentucky PSC and others.
AEP and Liberty failed to compare the AEP East zonal transmission revenue requirements under AEP ownership of Kentucky Power and AEP Kentucky Transmission Co. versus Liberty ownership, they said.
AEP is reviewing the filing, Scott Blake, company spokesman, said Friday, noting the Kentucky PSC has approved the deal.
“Our application addressed items FERC raised in December 2022, and we remain committed to working with federal and state regulators to resolve any remaining issues so the transaction can be approved,” he said in an email.
The PSC approved the transaction in May, but was limited by state law in its review of the deal, according to the filing with FERC.
Under Liberty ownership, the seven-state AEP zonal revenue requirements will increase because the company will have to build a new transmission organization, according to the Kentucky entities. The cost of doing that will “far exceed” any savings that American Electric Power Service will experience from no longer providing transmission service to the Kentucky companies, they said.
Also, if Kentucky Power and Kentucky Transco are separated from AEP ownership, but remain in the AEP East Zone, then the Kentucky PSC will lose its ability to use its retail ratemaking jurisdiction to influence AEP’s decisions regarding new transmission investments in the seven-state AEP East Zone, according to the filing.
“This result would also create a greater incentive for the AEP-affiliated companies to shift more costs to the Kentucky companies,” the PSC and others said, noting AEP and Liberty did not discuss or offer commitments to mitigate the issue.
“Absent more information or additional commitments, FERC should again reject the application,” they said.
Editor’s note: This story has been updated with a comment from AEP.
