American Electric Power and Algonquin Power & Utilities subsidiary Liberty Utilities have filed a fresh application with FERC seeking approval of AEP’s Kentucky operations’ sale to Liberty.
This time, the two utilities have added new commitments so the sale won’t raise customer rates (EC23-56).
FERC shot down the sale in December, indicating more consumer protections were needed before the commission could give its blessing.
The utilities have since added more safeguards, including a five-year freeze on the current return on equity and 55% equity capital structure; a commitment from Liberty to maintain the same credit profile for five years; and a five-year cap on operations and maintenance and administrative costs at the 2022 rate.
AEP and Liberty also pledge to hold wholesale power and transmission customers harmless from any transaction costs for five years following the sale. The proposed transaction’s other aspects remain unchanged.
The utilities are requesting an expedited review of the application and hope to the close the transaction by April 26. If they fail again to gain commission approval by then, termination rights kick in for the parties.
“When taken in total, these commitments will ensure that the transaction has no adverse effect on both Kentucky Power or Kentucky TransCo’s individual rates and the rate for the AEP East zone,” AEP and Liberty said in the filing.
The new sale application continues AEP’s two-year effort to offload its Kentucky operations to Liberty. Late last year, the parties agreed to shave $200 million off the purchase price down to $2.646 billion. (See AEP Accepts Lower Price for Kentucky Operations Sale.)
AEP said the transaction’s approval should bring an economic boost to retail customers in an “economically disadvantaged part of eastern Kentucky.” It cited previously agreed-upon compromises at the Kentucky Public Service that include a $40 million fund to help offset volatile fuel rates for the remainder of the year; a $55 million, three-year rate holiday on collecting a Big Sandy nuclear plant decommissioning rider; a $43.6 million cut in regulatory charges collected from customers for storm costs; and a new Kentucky call center in the Kentucky territory.
“AEP and Liberty are committed to the sale and are requesting FERC’s accelerated review of the application so customers in eastern Kentucky can begin benefiting from the transaction,” AEP CEO Julie Sloat said in a statement.
Sloat said the sale is just one component of AEP’s strategic plan. She said utility leadership remains dedicated to selling AEP’s competitive renewables portfolio and conducting a review of its retail business as part of its equity financing plan and goal for a 6 to 7% long-term growth rate.
