Duke Energy Kentucky seeks 18% natural gas rate hike

Natural gas delivery rate change to be effective in 2010

July 1, 2009 -- CINCINNATI -- Duke Energy Kentucky announced today it has filed a request with the Kentucky Public Service Commission seeking a rate increase for natural gas delivery service of approximately $17.5 million, or 14 percent on total gas revenues, to be effective in early 2010.

For an average residential customer using 70 ccf (ccf is 100 cubic feet, the standard unit of measure) of natural gas per month, the monthly bill will increase 17.9 percent, from $75.15 to $88.59, based on Duke Energy Kentucky's current rates for delivery.

Since its last natural gas delivery rate case implemented in 2006, Duke Energy Kentucky has invested more than $60 million to continue the accelerated gas main replacement program (AMRP), which has been a major initiative for the company's gas operations. The requested rate change would recognize the additional investment.

The 10-year AMRP program began in 2000 with the goal of replacing 209 miles of high-maintenance cast iron and bare steel gas mains and services with low-maintenance polyethylene pipe. Benefits of the AMRP include increased customer safety and system reliability, higher system operating pressure, lower line loss and stable operation and maintenance expenses.

Through 2008, 172 miles of main have been replaced in Kentucky. The program is 82 percent complete and scheduled for completion in 2010.

One key safety metric of the AMRP's success is the leak rate for the gas distribution system.

* The number of leaks repaired has decreased significantly, from 1,899 leaks repaired in 2002 to approximately 1,243 in 2008.
* The severity of leaks reported has been reduced.
* From 2006 to 2008, main repairs have been reduced by 41 percent.
* The reduction in leaks repaired has saved customers approximately $3.8 million dollars in maintenance expenses from 2001 to 2008.

"Duke Energy Kentucky is dedicated to providing gas distribution service and will continue to invest in its system to improve reliability and safety for our customers," said Julie Janson, president of Duke Energy Kentucky. "In the four-plus years since the last rate case, the company's operating and maintenance expenses have remained basically flat, but Duke's investment in infrastructure has left the company well short of recovering its costs of providing service to Kentucky customers."

Duke Energy Kentucky is also proposing a new rate structure – a straight fixed variable (SFV) rate design – that makes its ability to recover costs less dependent on the amount of gas used by its customers. Customers benefit from SFV rate design with more even billing throughout the year. If the rate design is approved, fixed distribution costs for the average residential customer will increase from the current $12 per month to $30 per month. Since the costs would now be spread throughout the year, the average residential customer benefits from lower heating bills during the winter months compared to the current rate design that traditionally spikes higher in the colder months.

"Because the cost of the actual product (natural gas) still comprises the largest part of a customer's bill, customers continue to have the ability to affect their monthly bills through conservation," Janson said.

Duke Energy Kentucky recognizes the impact of higher natural gas prices on its customers and offers energy efficiency programs, bill management assistance and energy usage information for both residential and non-residential customers, which are available on its web site, www.duke-energy.com.

Duke Energy Kentucky's operations provide natural gas service to approximately 95,000 customers in Northern Kentucky. The company also provides approximately 1,100 megawatts of electricity capacity to approximately 135,000 customers.

Source: Duke Energy