Kentucky officials have asked FERC to again shut down American Electric Power’s proposed $2.6 billion sale of its Kentucky operations to Liberty Utilities.

The Kentucky Public Service Commission, Kentucky Office of the Attorney General and Kentucky Industrial Utility Customers said in a March 30 protest that AEP (NASDAQ:AEP) and Canada’s Algonquin Power & Utilities (NYSE:AQN) conglomerate, whose North American assets include Liberty, have yet to address or propose mitigations for the “adverse impacts of the transaction on zonal transmission rates” (EC23-56).

FERC temporarily halted the transaction in December, directing AEP and Liberty to write in more consumer protections before it would approve the deal. AEP and Liberty responded in February by 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. (See AEP, Liberty Utilities Try Again on Kentucky Territory Deal.)

However, the Kentucky intervenors said that AEP’s and Liberty’s pledge that Kentucky Power and Kentucky Transco would remain in PJM’s AEP East transmission pricing zone “for the foreseeable future” is not good enough to protect consumers from rate increases.

The Kentucky PSC said even if Kentucky Power remains in the AEP East zone, its rates under Liberty’s ownership will increase because the utility will have higher incremental fixed and variable costs caused by “building a new transmission organization from the ground up.” The PSC said the zonal revenue requirement’s extra costs will “far exceed” any savings AEP will experience from shedding its Kentucky operations.

The regulators said that if Kentucky Power is separated from AEP ownership but remains in the AEP East zone, the PSC would lose its ability to use its “retail ratemaking jurisdiction to influence AEP’s decisions” on transmission investment in the seven-state AEP East zone, regardless of the benefit to Kentucky consumers. The commission said AEP-affiliated companies would no longer be under pressure to avoid shifting costs to Kentucky consumers.

“Applicants cannot simply ask the FERC and other stakeholders to accept its ostrich-like approach to the impacts if a move is made, or if it is not,” the Kentucky parties said.

They also argued that AEP and Liberty’s “extensive reliance” on future retail rate benefits aren’t relevant to FERC’s decision because the PSC deemed them necessary to shield consumers from the transaction’s rate hikes.

AEP and Liberty are hoping to close their transaction by April 26. If they fail again to gain commission approval by then, termination rights kick in for the parties.