By Rich Heidorn Jr.

FERC last week rejected Louisville Gas & Electric and Kentucky Utilities’ proposed transition for exiting from market power mitigation measures the commission had imposed to address the companies’ 1998 merger and withdrawal from MISO in 2006 (ER19-2396, ER19-2397).

The rate de-pancaking mitigation provisions were imposed to resolve horizontal market power concerns. In March, the commission agreed the provisions could be removed because loads located in the LG&E/KU market would have access to enough competitive suppliers after the mitigation is removed. It conditioned the removal on a transition mechanism to protect customers that had relied on transmission service on the MISO system.

FERC said that “although it determined that there would continue to be a sufficient number of competitive suppliers in the LG&E/KU market if the de-pancaking mitigation was terminated, termination will affect the relative economics of competing suppliers in different markets by making the cost of purchases from resources located in MISO more expensive.”

Eligible for the transition were contracts by the Kentucky Municipal Power Agency to supply KU requirements customers that went into effect on May 1; a requirements contract between the city of Benham and American Municipal Power; a requirements contract between the city of Berea and AMP that went into effect on May 1; and a contract between the city of Owensboro and Big Rivers Electric Cooperative.

The commission said the proposed transition mechanism filed by the companies in July was overly narrow and spelled out changes the companies must make regarding which customers and power purchase agreements should be covered and the definition of “covered” transmission service requests. It also ordered changes regarding which MISO schedules are eligible for reimbursement, reimbursement adjustments and the handling of exports.

In an accompanying ruling rejecting rehearing of its March order, the commission also identified three additional customers as eligible for the transition: KYMEA and member cities Paducah and Princeton (EC98-2-002, ER18-2162-001).

LG&E serves 411,000 electric customers in Louisville and 16 surrounding counties. KU serves 553,000 customers in 77 Kentucky counties and five counties in Virginia. The two companies, which are now PJM members, are owned by Allentown, Pa.-based PPL.