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A
Before
I
call
the
roll,
this
is
the
last
meeting
of
I
guess
this
interim
as
well
as
this
term
of
the
legislature.
We
have
some
members
that
have
are
not
running
again
and
I
just
wanted
to
recognize
those
members.
Of
course,
Senator
Matt
caslin
is
not
not
running
again.
A
Representative
Burch,
Tom
Birch
has
been
here
ever
since
I
came
here,
I
think
he's
the
dean
of
the
house
he's
probably
the
longest
serving
member
in
the
history
of
the
general
assembly,
and
certainly
representative
Burch
has
always
represented
his
constituents
very
well.
So
we
commend
him
for
that
and
we
honor
his
service
to
the
general
assembly
and
the
committee
as
all
the
other
members
that
I'm
going
to
mention
representative
Cantrell
McKenzie
Cantrell
is
also
not
running
again
represent
Jim.
A
The
Plessy
representative
Norman
Kirk
McCormick
is
not
not
running
representative
Mary,
Lou,
marzian,
representative
Melinda,
Gibbons,
prunty
and
I.
Think
representative
Attica
Scott,
so
I
want
to
thank
all
of
you
for
your
service
and
we
certainly
will
miss
having
you
on
this
committee.
So
with
that
I'd
ask
the
clerk
to
call
the
roll.
Please.
B
Senator
Carpenter
Senator
caslin
Senator
Harper
angel
senator
schickel
Senator
Southworth
Senator
Turner
Senator
Webb,
Senator,
Westerfield,
Senator,
wheeler,
representative
Blanton,
representative
bowling
representative
Bridges
here,
representative
Birch,
representative
Cantrell,
representative
dossett,
representative
Dotson,
representative
duplessy,
representative
Flannery
year,
representative
Fugate,
here,
representative
Johnson,
representative
Kirk,
McCormick,
representative
marzian,
representative
miles
representative
Gibbons,
prunty
representative
Scott,
representative
Stevenson,
representative
Wesley,
representative
White,
co-chair
Smith
and
co-chair
Gooch.
President.
A
A
We
we,
we
really
have
kind
of
a
short
agenda
today
we're
going
to
have
a
discussion
on
issues
related
to
the
Public
Service
Commission,
specifically
an
explanation
of
legislation
and
I'm,
not
sure
there
is
any
legislation
yet,
but
there
have
been
some
talk
about
securitization
of
utility
regulatory
regulatory
assets
and
then
energy
price
volatility
and
its
impact
on
the
utility
customers
cost
and
with
that
I
will
introduce
with
from
the
Public
Service
Commission
Kent
Chandler,
who
is
the
chairman
and
Kent?
C
Thank
you,
chairman,
Gooch
I,
appreciate
it
so
I
just
first
want
to
apologize.
I
I
certainly
didn't
provide
this.
This
presentation
with
much
Advance
I.
You
all
asked
me
last
week
and
I've
thrown
something
together.
I,
don't
want
to
indicate
that
throwing
something
together
is
any
disrespect
of
the
committee,
but
on
short
notice.
These
are
at
least
the
initial
part
of
the
presentations
of
some
pretty
complicated
subject
matter.
C
So
this
is
I
think
maybe
the
fourth
time
I've
presented
to
either
the
ijc
or
either
the
house
or
the
Senate
committees
and
so
I'm,
going
to
again
give
our
just
our
quick
background,
because
most
of
you
all
have
heard
it
a
handful
of
times
this
year
and
then
get
to
the
meat
of
the
situation.
C
So
initially
I
just
want
to
say
again:
my
name
is
Kent
Chandler
I'm,
chairman
of
the
Kentucky
Public
Service
Commission,
been
a
commissioner
for
about
two
and
a
half
years
prior
to
that
I
worked
at
the
commission
and
I
was
a
consumer
advocate
in
the
Attorney
General's
office.
Practicing
in
front
of
the
commission.
C
Importantly
I
can
only
speak
for
myself.
Nothing
I
say
today
is
should
be
taken
on
behalf
of
the
Public
Service
Commission.
The
commission
can
only
speak
through
its
administrative
orders
and
I.
Certainly
what
I
say
today
doesn't
reflect
upon
the
other
Public
Service,
commissioner,
so
the
Public
Service
Commission
is
a
independent
regulatory
agency.
That's
connected
to
the
energy
and
environment
cabinet
for
administrative
purposes.
Only
it's
a
three-seat
commission
that
carries
out
the
legislative
function
of
rate
making
through
quasi-judicial
quasi-judicial
proceeding.
So
if
that's
not
a
mouthful
I,
don't
know
what
is
so.
C
We
technically
have
more
than
a
thousand
utilities
that
we
regulate.
The
majority
of
those
are
Utilities
in
name
only.
They
are
entities
that
we
don't
actively
regulate,
such
as
certain
certain
telecommunications
providers.
We
actively
regulate
the
way.
I
would
that's
my
description.
It's
not
a
technical
term
about
200
utilities.
Those
utilities
provide
water,
sewer,
gas,
electric
and
telephonic
services.
C
We've
got
investor
owned
and
Cooperative
member-owned
Cooperative,
Electric
utilities
we
regulate,
Rural,
Water
districts,
Rural,
Water
associations,
investor
on
water
utilities
and
Natural
Gas,
Distribution
Systems.
Two
things
to
point
out
to
everybody.
I
think
the
that
are
important
for
these
conversations
is
we
we
don't
regulate
Municipal
Utilities
at
all.
If
it's
a
city-owned
utility
or
a
city
city,
Affiliated
utility,
we
don't
regulate
them,
except
that
we
do
regulate
the
safety
of
their
Natural
Gas
Distribution
Systems.
C
If
they
have
them,
we
also
do
not
regulate
the
rates
or
service
of
electric
cooperatives
that
receive
their
power
from
the
Tennessee
Valley
Authority,
the
they
they
that's
something
about
the
supremacy
clause.
They
look
down
on
us
trying
to
tell
them
what
to
do
so.
The
Public
Service
Commission
was
created
by
the
general
assembly
in
the
1930s.
C
Everything
we
do
for
the
most
part,
at
least
with
regards
to
utilities,
relates
to
rates
and
service.
The
statute
says
that
rates
have
to
be
fair,
just
and
reasonable
and
that
the
utility
has
to
provide
service
that
is
adequate,
efficient
and
reasonable.
C
So,
in
talking
about
this
idea
of,
what's
called
securitization,
I
felt
it
was
probably
it's
probably
impossible
to
understand
in
a
30-minute
presentation.
It's
taken
me
probably
about
two
and
a
half
years
to
have
an
appreciation
for
the
complications,
but
it
is
certainly
impossible.
If
you
don't
have
an
appreciation
for
how
the
commission
regulates
utilities
rates
so
quickly,
I'll
just
do
some
background
and
talk
about
the
the
parts
of
rate
making
that
are
relevant
to
this
idea
of
what's
called
securitization.
C
Hopefully,
I
can
give
an
example
of
of
how
it
can
work
in
other
states
that
have
this
and
then
I'll
stop
and
pause
for
questions,
but
I'll
certainly
take
any
questions
throughout
the
proceedings.
So
Utilities
in
Kentucky
are
not
competitive
businesses.
C
Instead,
the
general
assembly
says
that
their
rights
and
service
need
to
be
regulated
by
a
state
entity,
the
Public
Service
Commission.
So
the
reason
for
that,
or
at
least
the
initial
concern
for
that-
was
around
the
around
the
risk
of
wasteful
duplication
of
the
same
types
of
investment
in
service.
So
you
all
have
probably
seen
pictures
of
the
cities
in
the
early
1900s,
where
you
had
telephone
and
electric
poles
that
had
a
hundred
different
wires
of
all
these
different
competitors
running
across
it
right.
C
The
concern
was
that
that
was
not
a
particularly
efficient
use
of
capital,
so
specifically
for
electric
utilities.
The
general
assembly
has
provided
all
electric
utilities
to
find
service
territories
so
municipalities,
electric
co-ops
investor,
owned
utilities,
have
defined
service
territories
down
to
the
foot
EV.
They
are
the
only
entities
allowed
to
provide
electric
service
to
anybody.
That's
an
electric
consumer
in
that
territory,
and
there
is
no
competition
with
that,
though.
C
They
have
an
obligation
to
serve
every
single
entity
that
demands
service
in
that
service
territory,
so,
whether
it's
a
home,
whether
it's
a
factory
whatever
it
is,
if
you
are
located
smack
dab
in
the
middle
of
that
service
territory,
that
utility
As
Long
as
You
Follow,
their
commission
approved
rules.
They
have
to
provide
you
electric
service
at
defined
rates,
but
a
Great
Estate
granted
Monopoly,
which
is
exactly
what
the
defined
service
territories
are,
creates
two
primary
problems.
C
The
first
is
that
once
an
entity
gets
a
monopoly
that
they're
going
to
provide
really
terrible
service
to
people.
The
second
is
that
the
Monopoly,
as
we
all
know
about
monopolies,
would
like
to
have
profits
that
are
well
in
excess
of
the
cost
that
they
incur.
So
the
solution
to
those
issues
is
to
regulate
the
utilities,
rates
and
service.
C
So
again,
and
I'm
going
to
say
this
two
or
three
times
but
rate
regulation
of
monopolies,
especially
investor
own
monopolies,
is
a
function
of
costs
so
and
the
ideal
I'm
going
to
take
a
big
step
back
and
talk
about
economics
for
about
10
seconds.
So
in
an
ideal
version
of
of
competition
and
in
particular
a
quote
perfect
Market
short
run,
prices
will
reflect
or
should
reflect
the
marginal
cost
of
a
particular
product.
The
introduction
of
monopolies
leads
to
an
exception
that
the
firm
will
charge
prices
or
an
expectations.
Sorry
monopolies.
C
The
concern
is
that
they're
going
to
charge
prices
in
excess
of
their
costs,
leading
to
a
sell
of
less
Goods,
since
things
are
more
expensive
than
they
ought
to
be
and
resulting
in
what's
called
deadweight
loss.
So
this
goes
back
to
this
is
primarily
economics
from
the
early
1900s.
A
concern
around
well
I.
Just
think
that
this
thing
called
the
marginal
Revolution.
It's
kind
of
been
disproved
since,
but
this
idea
of
when
Supply
meets
demand,
there's
a
perfect
price
right.
C
So,
under
a
scenario
of
having
Monopoly
prices,
the
producer
makes
more
has
more
Surplus
than
they
would
have
originally
under
competitive
system.
The
consumer
has
less
Surplus
than
they
would
have
under
competitive
scenario,
but
there's
also
this
amount
of
quote
Surplus
that
accrues
to
neither
the
producer
or
the
consumer
right.
So
all
the
producers
better
off
everyone
all
of
the
world
would
have
been
better
off.
Had
there
been
competition
right
and
what
doesn't
get
realized
is
called
Dead
weight
loss,
and
so
just
here's
just
a
little
map
where.
C
Getting
in
early
yeah,
all
right
he's
outside
of
the
theme
park,
waiting
waiting
for
the
gates
to
open
so
just
quickly
in
a
competitive
market
is
where
PC
the
competitive
price
meets.
Qc
the
competitive
quantity
right,
the
amount
of
quantity
that
would
be
purchased
in
a
competitive
market,
so
M,
qm
and
PM
are
the
result
of
a
monopoly.
So
the
price
is
higher
and
the
quantity
that
was
sold
is
less
the
yellow.
There
is
dead
weight
loss.
C
We
are
all
worse
off
if
a
monopoly
is
able
to
charge
prices
in
excess
of
the
of
the
perfect
price
or
the
competitive
price.
So
this
is
this
is
mostly
Theory,
but
it
it.
It
is
the
primary
concern
with
non-regulated
monopolies,
so
with
that
again
going
back
to
cost.
Since
we
have
concerns
about
the
prices
that
a
monopoly
would
charge,
particularly
charging
rates
in
excess
of
their
own
costs
rates
are
are
created
by
public
utility
commissions
based
on
the
cost
incurred
or
the
expected
cost
to
be
incurred
by
a
utility.
C
So
when
we
have
rate
cases
that
are
filed
with
us,
the
very
first
thing
you
do
in
rate
making
is
to
determine
all
of
the
cost
of
a
utility
that
they've
either
incurred
if
you're
looking
backwards
or
expect
them
to
incur
in
a
particular
year
that
you
think
and
I'm
saying.
The
fictional
public
utility
commissioner
should
think
that
a
utility
should
incur
right.
So
if
the
utility
paid
ever
all
of
their
Executives,
an
extra
million
dollar
bonus.
C
So
all
of
these
different
costs
are
taken
into
account
and
these
costs
can
include
operations
and
maintenance
expenses
Investments
that
the
utility
has
made
and
also
includes
a
return
on
the
capital
that
those
Investments
are
underpinned
or
underpinned
by.
C
So
here's
a
just
how
we
create
What's
called
the
revenue
requirement.
The
revenue
requirement
is
the
determination
of
the
utilities,
annual
expenses
that
the
Public
Utilities
Commission
says,
should
be
recovered
from
customers,
and
it's
calculated
as
follows.
You
take
all
the
operations
and
maintenance
expenses
which
some
of
kind
of
makes
sense
as
repairs,
depreciation,
expense
on
assets,
labor
costs,
salaries,
fuel,
Insurance
taxes,
I
already
said
taxes,
taxes
always
feel
like
twice
so
we'll
just
say
it
twice.
C
You
take
all
those
operations
and
maintenance
expenses,
and
then
you
add
it
to
this
other
number,
and
the
other
number
is
a
return
on
your
investment,
a
return
on
your
net
investment
and
that's
calculated
as
being
your
original
investment
reduced
by
the
amount
of
that
investment,
you've
already
recovered
times,
a
rate
of
return.
C
So
the
rate
of
return-
and
this
is
where
we're
getting
down
to
Brass
tax
when
it
comes
to
securitization.
The
rate
of
return
that
is
used
to
calculate
a
utilities
rates
is
the
cost
of
debt
and
the
cost
of
equity
Capital
that
underpins
their
investment.
Now.
This
is
the
part
of
this
that
I'll
stop
and
make
very
clear
that
when
I'm
talking
about
all
this,
this
is
the
calculation
and
the
beginning
step
for
regulating
investor
owned
utilities.
C
This
is
not
the
calculation
you
use
to
determine
the
revenue
requirement
or
to
make
rates
for
member-owned,
electric
cooperatives
and
the
reason
for
that
is
they're,
not
investor
owned.
So
the
return
on
investments
is
not
the
primary
reason
or
not
a
primary
calculation
for
setting
their
rates.
Their
rates
are
set
differently
and
their
rates
are
just
about
being
able
to
repay
their
lenders
and
having
a
little
bit
of
cushion
left
over
in
case
things.
Don't
go
right,
that's
the
simplest
way.
I
can
describe
how
you
set
rates
for
electric
co-ops.
D
C
Here's
an
example
of
what
that
rate
of
return
and
that's
the
rate
of
return
and
the
level
of
investment
is
all
that
securitization
deals
with
with
utilities.
So
the
rate
of
return
in
that
in
that
calculation
is
the
cost
and
the
type
of
capital
that
was
used
to
fund
the
utilities
investment.
C
C
After
that,
Equity
investors
get
whatever
is
the
remainder
at
the
very
end
of
the
day,
so
Equity
investors
have
a
higher
risk
of
a
return
on
their
investment
than
debt
and
debt
holders,
and
lenders
do
so
if
a
utilities
Investments
were
funded
by
both
debt
and
equity,
and
this
is
this
is
fairly
representative.
It's
about
half
for
most
utilities,
half
their
Investments
are
funded
by
debt
and
the
other
half
is
funded
by
equity.
C
C
If
you
had
originally
invested
in
your
utility,
a
hundred
dollars
and
you've
already
over
the
last
few
years,
recovered
half
of
that
fifty
dollars
when
you're
calculating
your
rates
as
a
utility
in
this
year
that
seven
percent
is
calculated
based
off
your
current
net
investment,
which
is
the
remaining
fifty
dollars,
and
so
your
return
is
three
dollars
and
fifty
cents
now,
three
three
dollars
and
fifty
cents
in
this.
In
this.
E
C
Know
scenario
is
not
the
utilities
profit
three
dollars
and
fifty
cents
is
the
rate
of
return.
Part
of
that
rate
of
return
is
the
amount
that
you
have
to
pay
back
each
year
to
your
lenders.
That's
a
dollar,
so
that
is
the
half
of
the
fifty
dollars.
The
remaining
fifty
dollars
is
split:
twenty
five,
twenty
five
debt
and
equity,
and
of
that
twenty
five
dollars,
your
debt
rate
was
four
percent,
which
is
a
dollar
so
two
dollars
and
fifty
cents
that
year
is
the
utilities
return
on
Equity
right.
C
That's
the
amount
of
profit
that
the
utility
made
for
shareholders
in
this
given
scenario,
so
it
should
be
clear
by
now,
if
I
did
any
did
my
job
at
all.
To
this
point,
the
presentation
utilities
make
more
profit
the
more
they
invest
right.
That
is
that's
what
the
whole
scheme
is
set
up
to
do
right.
C
The
idea
was
that
legislatures
decided
that
electricity
and
water
and
gas
is
good.
We
want
our
people
to
have
it,
and
how
do
we
get
private
Capital
to
go
out
and
put
Steel
on
the
ground
and
pipes
in
the
ground
to
provide
those
services
to
people?
They
the
legislatures,
decided
to
incent
investment
in
those
Services
right,
so
the
more
Steel
on
the
ground,
the
more
investment
a
utility
makes,
and
you
apply
the
exact
same
amount
of
return,
the
more
money
that
utility
makes
right.
C
A
Sir,
along
those
lines,
does
the
Public
Service
Commission
limit
what
a
particular
utility
May
invest?
And
if
you
do,
is
that?
Because
you're
concerned
that
that,
if
they're
investing
more,
the
rate
is
passed
on
to
the.
C
Consumer,
so
the
answer
to
the
first
question
is
the
the
in
rate.
Making
the
Public
Service
Commission
explicitly
sets
the
amount
of
investment
that
should
be
recovered.
So
the
answer
is
yes:
now,
just
a
Nuance
that
I
answer,
the
PSC
tells
you
how
much
you
can
recover
from
customers,
not
how
much
you
can
invest.
So
if
you
decide
to
go
off
Hog,
Wild,
I,
guess
I'd
say
and
spend
to
invest
a
bunch
of
money
that
you
that
the
maybe
the
commission
had
previously
told
you
not
to
invest.
C
It's
really
fact
specific
to
the
reason
why
there's
probably
dozens
of
reasons
in
a
particular
situation,
why
the
utility
might
why
the
commission
might
not
might
try
to
limit
or
inhibit
the
amount
that
customers
recover
or
that
the
utility
invests
and
I
would
say
that
my
experience
has
been
that
one
of
those
reasons
is
a
concern
for
the
impact
on
rates
if
the
utility
invests
too
much
money
because
again,
if
it's
recoverable
from
customers,
it's
going
to
show
up
in
that
bill,.
C
I
would
I'll
I'll,
say
this
differently.
I
would
say
that
in
any
situation,
where
you're
rate
regulated
like
this,
that
you
would
most
likely
invest
money
that
you
believe
to
be
recoverable
and,
and
so
that
goes
back
to
one
of
our
our
primary
statutes.
It's
the
it's
originally,
the
second
section
in
in
chapter
278,
the
section
we
operate
under
it
and
it
basically
says
before
utility
can
build
something.
C
It
has
to
come
to
the
Public
Service
Commission,
to
get
a
certificate
that
that
expansion
or
that
building
is
necessary
right,
and
that
was
a
way
of
getting
basically
pre-approval
I'm
oversimplifying
it
and
that's
not
technically
legally
correct,
but
it
basically
getting
pre-approval
before
the
utility
goes
out
and
spends
a
bunch
of
money
and
invest
a
bunch
of
money.
They
would
come
to
the
commission
and
make
sure
that
that
investment
is
needed,
and
that
does
two
things
one.
C
It
makes
sure
that
the
utility
is
that
the
commission
is
making
sure
that
the
utility
is
making
the
right
kind
of
Investments,
but
it
also
protects
the
utility
to
a
certain
degree,
because
they've
already
had
the
commission
pass
judgment
on
their
proposal
that
that
investment
was
needed.
So
that
really
reduces
the
risk
that
in
the
long
term,
the
commission
won't
deny
recovery
of
those
Investments.
A
Okay,
so,
but
in
some
cases
you're
talking
about
that,
Utah
is
trying
to
expand,
but
another
situation
may
be
that
that
utility
is
wanting
to
upgrade
like
existing
infrastructure,
whether
it
be
pipelines
or
you
know,
utility,
the
Grid
or
whatever,
but
it
will
still
be
the
same.
Your
your
you
in
some
instance
limit
how
much
Investments
a
utility
can
make
per
year
in
a
in
in
their
service
area.
That's.
C
Right,
that's
right
and
I
think
that
I,
don't
I'm
I'm
racking
my
brain
for
an
order
in
the
last
two
and
a
half
years,
where
we've
said
something
explicit
around
that,
but
at
least
in
the
last
five
or
six
years
there
have
been
orders
where
the
commission
said.
Look,
we
think
you're,
making
Investments
way
too
fast,
we're
worried
about
the
cumulative
impact
on
customers
of
those
Investments,
and
we
would
like
to
limit
the
amount
of
investment
you
make
to
x
amount
of
dollars
the
utility
at
any.
C
Given
time
is
every
time
they
file
a
rate
case
they're.
Certainly
they
have
a
right
and
every
one
of
those
cases
that
to
ask
to
say
look.
We
have
a
need
for
I'm.
Just
making
up
numbers.
Commission
said
you
can
only
spend
10
million
dollars
on
this
per
year,
because
we're
worried
at
spending,
15
or
20
might
be
too
much.
If
utility
comes
back
in
every
single
rate
case,
they
can
say
we
want
it
to
be
12
next
year.
C
We
want
it
to
be
29,
you
know
we
need
it
to
be
X,
because
we
have
all
these
needs
and
not
letting
us
do
that.
Results
in
why
the
reality
of
rate
making
is
the
utility
can
file
an
application
to
do
something
each
and
every
single
day
after
the
utility
after
the
commission
has
denied
it
right.
There's
nothing
is
ever
permanent
in
terms
of
the
commission's
denial,
the
utility
always
has
a
right
to
come
back
and
ask
to
do
something
different
foreign,
so
the
utility
just
because
I
don't
want
to
miss
something.
F
Yeah
just
briefly
so
they
they,
so
the
utility
can
ask
for
a
raise,
but
they
can
also
apply
for
through
increases
also
through
different
federal
agencies.
Right
is
that
another
appeal
for
them
to
go
around,
maybe
ask
for
increase
passive
costs
to
like
ferc
or
miso
or
yeah.
So.
C
It
would
depend
on
what
the
type
of
cost
is
so
foreign
utilities.
That
may
not
necessarily
be
the
case,
at
least
not
with
the
facilities
that
are
jurisdictional
to
us,
but
with
electric
utilities
there
are
far
more
of
their
costs
or
their
facilities
that
are
in
which
federal
agencies
also
have
concurrent
jurisdiction,
and
the
reality
is
that
we
can't
reprice
a
federal
determination
of
rates.
So
if,
if
a,
how
do
I
say
this?
If
a
if
ferc,
for
instance,
says
a
transmission
expenses
X,
the
the
transmission
rate
is
X?
C
C
A
utility
can
only
incur
so
many
costs
that
don't
get
passed
on
to
customers
until
their
starts
becoming
a
problem
of
them
being
able
to
run
that
utility.
If
utility
is
incurring
costs
every
single
year
and
recovering
none
of
it
from
customers,
for
instance,
the
extreme.
The
utility
is
not
going
to
be
able
to
provide
service.
G
G
And
a
second
question
I
have
is
air
base
base
rate.
This
is
without
sewage.
Is
now
fifty
dollars
a
month
for
base
rate,
how
many,
how
many
gallon
of
water
is
permitted
or
is
covered
under
that
base
rate.
C
I,
don't
I
don't
have
that
in
front
of
me,
like
I
said:
we've
got
150
water
utilities,
I,
don't
I
I,
don't
remember
the
the
rates
for
for
the
base
rate,
at
least
for
Martin,
County
or
I
guess
I
know
about
the
rate,
but
I
don't
know.
Every
utility
is
different
in
the
amount
that
you
I
don't
know.
This
is
my
characterization
that
you
get
free
with
that
base
rate.
C
G
Exact
rate
give
me
that
number,
because
I
have
so
many
people
that
are
struggling
with
their
utility
bill
with
their
water
that
water's
off
half
the
time
it
was
off
yesterday.
G
You
know
it's
just
one
break
after
another,
and
you
know
I've,
hustled
and
lobbied
for
money
down
here
for
our
water
and
I
know
that
we've
gotten
millions
of
dollars
to
put
into
our
water
system
and
we're
still
continuing
to
have
large
price
increases
and
we're
still
having
to
be
with
without
water,
for
you
know,
sometimes
as
much
as
24
hours,
sometimes
as
much
as
two
and
three
days
so
I
wanted
to
bring
that
to
your
attention.
C
A
C
Is
this
is
all
I
do
every
day?
So
please
any
other
questions.
Any
question
I'll
be
here
all
day
and
then
I'll
I'll
be
here
for
the
next
year
and
a
half,
so
so
the
the
foreign
you
make
the
exact
same
amount
per
dollar
invested
right,
the
more
you
invest,
the
more
money
you
make,
so
the
PSE
determines
that
cost
of
equity
capital
in
each
case
and
when
doing
figuring
out
what
investors
need.
C
It's
not
like
debt,
where
you've
got
a
document
that
says
what
the
lender
requires,
as
the
debt
cost
Equity
is,
is
much
more
it's
much
harder
to
determine
what
investors
are
demanding
to
be
paid
on
their
Investments.
C
So
that's
the
preface
for
securitization,
so
the
top
line
is
the
a
very
legalese
way
of
saying
what
securitization
is,
but
the
simplest
way
is
in
the
first
bullet
for
the
second
bullet
point
there
that
securitization
is
a
process
that
would
be
set
out
by
Statute,
so
that
customers
of
a
utility
can
effectively
buy
an
asset
from
the
utility
using
money
provided
by
bonds
financed
by
lenders
so
effectively,
since
the
utility
earns
an
equity
investment
or
an
equity
return
and
a
debt
return
on
their
own
Investments,
replacing
that
investment
with
a
only
using
only
debt
Capital
reduces
the
financing
cost
of
that
equity.
C
So
the
best
way
to
think
about
this
is
that
you're
not
reducing
the
principle
of
the
loan,
but
you're,
effectively
refinancing
it
and
you're
refinancing
it,
and
it's
not
necessarily
in
the
utilities
name.
It's
certainly
I'll
get
to
a
second,
it's
not
the
state's
name.
It
is
backed
by
captive
rate
payers.
C
So
sometimes
these
bonds
that
are
used
to
buy
out
the
utility
Investments
are
referred
to
at
colloquially
as
rate
payer
backed
bonds,
because
they're
financed
on
the
premise
that
a
utilities
customers
pursuant
to
a
statute,
have
guaranteed
the
repayment
of
the
bond
according
to
predetermined
rates
and
schedules.
C
So
here's
a
scenario
and
I
picked
up
fairly
extreme
scenario
in
the
sense
of
the
numbers
make
the
decision
obvious.
But
regretfully
this
is
something
that
plenty
of
states
have
dealt
with
and
at
least
to
a
certain
degree,
the
folks
in
in
the
eastern
part
of
the
state.
Will
this
will
sound
halfway
familiar
so
the
scenario
is
a
utility
has
a
power
plant
that
has
200
million
dollars
left
of
investment
on
it
that
the
utilities
yet
recovered.
C
So
the
utility
figures
out,
they
ask
you,
know,
contractors
and
and
ask
folks
what
it's
going
to
cost
and
they
figure
out.
They
do
rfps
and
they
figure
out
that,
in
order
to
comply
with
the
law
that
200
million
dollar
power
plant
is
going
to
have
to
be,
increa
have
to
have
Investments
made
to
it
to
get
into
compliance
and
that
those
Investments
are
going
to
cost
an
extra
500
million
dollars.
C
However,
replacing
retiring
and
replacing
that
generator
with
another
generator
or
group
of
generators
would
cost
175
million
dollars,
and
the
Assumption
for
this
scenario,
is
that
the
replacement
generator
would
last
exactly
as
long
and
be
the
cost
of
which
would
be
recovered
over
the
exact
same
life
as
what
that
new
generator
would
run
after
it
gets
reinvested.
So
the
utility
sits
down
talks
to
their
accountants
and
says
it
is
the
least
cost
most
reasonable
thing
for
customers
to
retire.
C
At
the
same
time,
the
utility
request
PSC
approval
for
the
deferral
and
subsequent
recovery
of
the
remaining
value
of
the
retiring
power
plant
as
a
quote
regulatory
asset.
So
you
all
I'm
sure
you
all
heard
German
Gooch,
say
regulatory
asset
at
the
beginning
of
this,
for
anybody
in
here
that
pays
a
bill
to
Kentucky
Power,
what
used
to
be
the
Big
Sandy
retirement
Rider,
which
is
now
that
I
think
the
Big
Sandy
decommissioning
Rider
is
a
regulatory
asset.
C
So
a
regulatory
asset
is
a
paper
asset
that
reflects
a
cost
that
otherwise
would
have
to
have
been
incurred
in
a
single
year
like
a
ordinary
expense,
but
it's
treated
like
an
asset
and
instead
it's
recovered
over
a
number
of
years.
Generally,
since
it's
a
long-term
investment
and
ties
up,
Capital
regulatory
assets
earns
a
return
like
other
Investments,
including
a
return
on
the
equity
Capital
portion.
C
C
So
the
retirement
and
replacement
of
the
generator
is
an
economically
is
economically
better
for
customers,
because
one
of
them
is
going
to
cost
500
million.
The
other
one
is
going
to
cost
175
million
dollars.
If
the
utility
did
not
expect
to
get
deferral,
accounting
for
that
200
million
dollars
and
instead
knew
they
would
have
to
eat
that
200
million
dollars.
They
wouldn't
do
it
and
that
would
be
terrible
for
customers,
because
they
would
keep
running
that
200
million
dollar
plant
and
come
to
the
Public
Utilities
Commission
and
propose
the
500
million
dollar
upgrade.
C
So
assuming
that
the
PSE
agrees
that
the
replacement
generator
is
the
least
cost
best
option
to
serve
customers,
here's
where
the
scenario
stands,
the
old
power
plant
gets
retired.
The
value
of
the
old
plant
is
200
million
dollars,
the
new
generator
costs,
175
million
dollars
and
the
utility
earns
a
return
and
charges
customers
a
return
on
that
375
million
dollars
if
it
didn't
retire
in
secret
rig
asset.
C
C
So
here's
the
benefit.
This
is
where
we
get
to
how
how
it
seeks
and
I
don't
have
slides
on
this
part,
but
the
benefit
is
that
through
securitization,
which
I'll
explain
the
process
here
in
a
second
that
200
million
dollars
that
represents
a
regulatory
asset,
a
paper
asset
for
an
for
a
power
plant.
That's
now
on
the
ground
and
retired
that,
if
it's
stuck
with
a
utility
under
that
the
the
what
I
was
talking
about
earlier,
it
would
earn
a
seven
percent
return
for
the
utility
each
year.
C
If
customers,
if
securitization
occurred
and
customers
through
rate
payer
back
bonds
effectively,
were
on
the
hook
for
that
200
million
dollars
and
sent
a
200
million
dollar
check
to
the
utility,
then
the
cost
to
customers.
The
financing
costs
would
only
be
four
percent
if
it
was
debt.
Only
therein
lies
the
benefit
that
some
states
have
determined
is
derived
from
securitization
that
you
effectively
refinance
regulatory
assets
for
assets
that
are
no
longer
in
productive
service.
C
So
the
process
and
I'm
going
to
move
quickly
here,
because
you
all
have
these
slides,
you
can
look
back
at
it,
but
the
process
would
be
that
the
utility
comes
to
the,
and
this
is
in
other
states
that
have
this
utility
comes
to
the
Public
Utilities
Commission
and
says
we
want
to
do
securitization
for
this
regulatory
asset
that
we
have.
C
We
want
to
go
out
and
find
bondholders
who
will
lend
the
money
to
customers,
and
here
are
the
costs
and
charges
that
we're
going
to
charge
customers
in
order
to
make
sure
that
the
bondholders
get
repaid
and
the
utility
isn't
those
aren't
the
utilities
dollars.
The
utility
is
just
they
just
so
happen
to
have
captive
customers
who
pay
bills,
and
so
the
utility
will
be
recovering
that
cost
on
behalf
of
lenders,
so
the
application
would
include
what
the
costs
that
are
represented
by
the
regulatory
asset
are
so
a
retired
power
plant.
C
That's
now
you
know
on
the
ground
is
hopefully
some
something
else
can
be
put
there
for
goodness
sakes
a
testimony
describing
what
the
proposal
would
be,
what
the
transaction
would
look
like,
what
the
customer
impact
would
be,
what
the
expected
savings
would
be,
what
the
cost
of
financing
would
be.
What
is
that
debt
rate?
Do
you
expect
it
to
be
three
percent
four
percent
five
percent,
and
what?
What
is
your
proposal
to
ensure
that
those
costs
are
non-bypassable
so
that
customers
have
to
pay
them
every
month?
C
Because
that's
why
you
get
such
a
low
cost
of
debt
for
these,
for
these
charges?
I'll
talk
about
in
a
second
but
securitization
bonds.
Up
to
this
point,
there
have
been
62
billion
dollars
across
the
United
States
of
securitization
bonds
issued
by
utilities.
C
So
the
PSE
would
review
and
other
states
review
the
application
to
make
sure
that
in
totality
The
Proposal
is
good
for
customers.
That
would
probably
look
like
a
Net
Present
Value
benefit
to
customers
over
whether
it's
10
or
20
years
as
compared
to
what
would
happen,
but
for
the
securitization
make
sure
that
securitization
doesn't
unnecessarily
impair
the
health
of
the
utility.
There
is
a
some
credit
rating
agencies
or
more
reasonable
than
others.
C
Some
perceive
this
to
be
debt
for
the
utility,
even
though
the
utility
doesn't
hold
the
debt,
some
don't,
but
certainly
that's
something
to
take
into
account,
because
you
don't
want
to
make
the
utility
so
worse
off
that
customers
are
in
totality
worse
often,
they
would
be
if
they
didn't
securitize
this,
and
then
some
states
allow
for
the
Public
Utilities
Commission,
since
this
is
what
they
don't.
They
don't
do
this
every
day
to
employ
either
Financial
or
legal
professionals.
C
So
the
PSC
would
look
at
whether
it's
a
net
benefit.
Whether
customers
are
going
to
pay
the
bond
until
it's
it's
fully
paid
off
and
what
the
result
of
of
the
securitization
would
look
like.
So
why
do
you
securitize?
Well,
I've
talked
about
most
of
it.
You
replace
high
cost
high
cost
utility
investment
with
low-cost
debt
utilities,
make
investment
in
Assets
in
order
to
provide
services
they're,
not
financing
entities
right.
C
So
this
is
a
way
to
make
sure
that
they
get
their
money
back
so
that
they
can
then
take
that
money
once
something
is
securitized
and
reinvest
it
into
the
assets
that
are
needed
to
provide
service.
So
a
great
example
of
this
in
Most
states
that
have
used
this
for
retired
generators,
the
utility
will
take
that
money
that
was
securitized
after
they
get
that
check
and
they'll
go
and
invest
in
the
replacement
generation.
C
About
half
the
states
have
securitization
legislation.
Some
are
more
broad
than
others.
Some
are
very
particular
about
what
can
and
can't
be
securitized
a
couple
of
things.
Couple
of
of
items
that
are
allowed
to
be
securitized
or
have
been
securitized
in
the
past
are
retired
generation.
A
couple
midwest
states
who
had
during
winter
storm
Yuri
their
utilities
incurred
billions
and
billions
with
a
B
billions
of
dollars
in
gas
costs
over
just
a
couple
of
days
period
when
otherwise
they
would
have
just
incurred
merely
one
two,
three
four
million
dollars.
C
It
was
some
in
some
instances,
100
or
200
times
more
than
what
they
were
used
to
paying.
Some
of
those
utilities
were
allowed
to
securitize
those
and
try
to
reduce
that
cost
to
customers.
Some
of
the
folks
in
the
western
part
of
the
US
have
used
taken
Wildfire
costs
and
securitize
those
and
then
especially,
some
of
the
the
states
that
are
in
the
Gulf
or
on
the
Atlantic
coast
have
used
securitization
to
reduce
the
cost
of
extreme
storm
damage.
The
debt
is
not
backed
by
the
full
faith
in
the
credit
of
the
state.
C
They
are
instead
obligations
of
captive
rate
payers,
not
even
of
the
utility.
So
again
as
of
May
this
year,
62
billion
dollars
of
utility
securitization
bonds
have
been
issued
by
Electric
utilities.
So
why
do
you
need
a
statute?
You
need
a
statute
to
make
sure
that
there's
enough
protections
for
lenders
so
that
they
give
you
the
absolute
cheapest
rate.
That's
I'm
not
going
to
go
into
any
more
details
on
that.
C
You've
got
the
slide,
but
that's
the
idea
is
you
need
the
protection
that
the
legislature
gives
you
to
ensure
lenders
to
ensure
that
customers
pay
the
absolute
lowest
rate
so
I'd
like
to
stop
there.
If
I
could
chairman
I
just
have
a
couple
of
slides
on
the
utility
rate
issues,
the
fuel
adjustment
calls
and
the
volatility?
But
if
you
want
me
to
keep
going
on
Canada.
A
D
Thank
you,
Mr
chairman,
so
many
questions
so
little
time
going
back
to
your
scenario,
this
this
scenario
that
you
presented
is
that
the
typical
scenario
that
that
causes
the
securitization
need.
C
I
hate
to
say,
something's
typical,
but
I
would
say
that.
Let
me
say
it
this
way:
we
don't
get
hit
by
wildfires
and
we
don't
necessarily
have
hurricane
issues
and
so
I'd
say
it's
the
most
likely
to
occur
in
the
state
of
Kentucky
I'll,
say
it
that
way
so.
D
The
scenario
really
generates
a
need
for
an
early
retirement
of
a
power
plant
is
that
correct,
yeah.
C
So
I
I
generally
I
would
say
yes,
I
do
I
think
I
perceive
the
idea
of
early
early
retirement.
Maybe
I
would
take
issue
with
that.
Only
because
I'll
say
this
way.
G
C
D
Well,
this
is
the
scenario
we
seem
to
be
seeing
time
and
time
again,
so
I
think
it's
fair
to
to
specify
this
scenario
yeah.
Okay,
so
moving
on
from
that,
when
you
talk
about
the
necessary
replacement
generation.
D
C
And
I
I
want
to
make
clear,
I
didn't
I,
don't
think.
I
said
that
the
power
plant
was
coal-fired,
but
I
I
just
was
making
a
you
know
simplifying
assumption,
but
but
the
reality
is
that
no
two
things
are
exactly
the
same
when
it
comes
to
power.
Plants,
gas
and
thermal
generation
generally
looks
very
similar.
Coal,
gas,
natural
coal,
natural
gas
and
and
nuclear,
but
certainly
the
characteristics,
their
operating
characteristics
and
the
reliability
are
are
are
different.
D
Well,
it's
just
that
one
of
the
assumptions
is
that
you
get
the
same
service
with
the
new
technology
right,
I'm,
not
sure,
that's
actually
realistic
in
most
cases,
so
we
have
to
be
very
careful.
I.
Think
if
we're
going
to
try
to
do
something
like
this
part
of
the
this,
the
calculation
has
to
be.
What
are
we
doing
to
the
customer's
service
and
I'm?
Not
sure
we've
answered
that
today,
and
maybe
we
need
lots
more
conversations
about
it,
but
we've
got
to
take
that
into
consideration
and
then
no.
C
I
appreciate
that
I'm
happy
to
have
that
conversation
I,
think
that
was
part
of
my
presentation.
C
D
A
D
Ahead
bottom
line:
does
this
process
increase
for
co-ops
their
cost.
C
C
Because
the
the
trade-off
you're
talking
about
that
creates
savings
when
I
was
talking
about
savings
earlier,
is
the
replacement
of
a
capital
return
with
the
debt
return,
but
co-ops
exclusively
use
debt
Equity
to
find
or
debt
Capital
to
finance
all
their
Investments?
So
it
it?
C
How
do
I
say
this
that
that's
as
much
about
replacing
some
replacing
something
that
cost
exactly
the
same
amount
and
going
through
a
whole
process
to
do
it?
There
would
be
no
savings
there
for
Electric
Cooperative.
A
You
Mr
chair,
thank
you.
Well,
let
me
say:
I
think
the
commissioner
I
have
talked
about
this.
You
know.
Privatization
certainly
is
something
that
might
work
in
a
situation
like
in
East
Kentucky
with
the
Big
Sandy
that
had
already
been
closed.
People
were
already
having
to
pay
those
stranded
costs
and
their
utility
bills,
and
we
were
looking
for
some
ways
to
maybe
lower
those
costs.
A
There's
no
way
that
I
would
be
working
on
a
bill
that
would
in
some
way
incentivize
closing
a
base
load
power
generation
from
coal
or
anything
else
that
was
85,
90
percent
efficient
I
just
wouldn't
do
that,
and
so
that's
not
the
intent
as
to
what
we're
trying
to
do
here.
C
And
if
I,
if
I,
could
on
that
term,
just
that's
why
I
made
it
such
an
extreme
extreme,
because
I
wanted
to
I
wanted
to
get
straight
into
what
securitization
actually
is
and
how
it
impacts
it,
but
I
I
would
I
would
say
very
very
directly.
Those
are
not
the
type
of
decisions
that
are
in
front
of
us.
Nothing
is
that
cut.
A
To
the
numbers,
just
the
process,
I
understand
those
are
probably
happening
in
other
states
where
people
are
actually
promoting
privatization,
Too
Close,
you
know
existing
coal
or
whatever
and
replace
them
with
things
that
are
much
less
reliable,
Senator,
wheeler,
I
think
I
almost
forgot.
That's.
H
Fine
Mr,
chairman
and
I
think
representative
Johnson
hit
on
a
few
things.
I
was
going
to
discuss
in
the
sense
that
first
I
know
can't
we
we
had
several
discussions
about
securitization
in
the
past
and
I
would
agree
that
I
think
in
Kentucky.
None
of
us
wants
to
to
do
any
type
of
legislation
that
would
promote
the
acceleration
of
any
closure
of
coal-fired
plants
within
the
Commonwealth
coming
from
a
coal
producing
region.
I
know
I
would
not,
but
a
few
questions
for
me.
H
If
the
if
the
utilities
were
to
close
the
asset
or
or
to
decide
that
the
particular
asset
upgrading
it
to
meet
environmental
concerns
was
in
the
benefit
of
the
rape
players,
there's
still
going
to
be
new
costs
in
the
form
of
I
guess
in
most
likely
I
guess
from
what
Washington
would
be
mandating
Renewables
that
will
be
passed
upon
passed
on
to
the
the
rate
payers,
correct.
C
Yeah,
it
would
be
likely
at
this
point
that,
with
with
a
couple
of
exceptions
and
I
I,
think
one
of
our
utilities
could
probably
retire
one
of
their
generators
and
not
necessarily
need
to
replace
it.
But
as
a
general
matter,
we
we
look.
We
frown
upon
our
utilities
having
so
much
generation
that
they
could
retire
on
without
needing
to
replace
it
with
something.
So
most
of
them
are
tight
enough
with
capacity
that
it
would
necessitate
some
sort
of
replacement.
Okay,.
H
And
and
there's
probably
an
indirect
cost
passed
on
to
Consumers
at
well
as
well,
because
a
lot
of
these
renewable
sources
are
actually
being
subsidized
by
the
federal
government.
I
mean
you
know.
If
you
compare
apples
to
apples,
usually
you
know
the
renewable
resources
aren't
quite
as
efficient
from
a
production
capacity
as
traditional
fossil
fuels.
Correct.
H
C
Yeah
I,
yes,
I,
think
that
I
think
it's
pretty
clear.
They
either
get
production,
tax
credits
or
investment,
tax
credits,
but
I
I,
just
as
an
aside
I
do
think
there
are
other
resources
that
that
get.
It
is
not
a
particularly
Level
Playing
Field,
depending
on
what
Congress
passes
in
any
given
year.
That's
right.
I
H
Our
job,
in
a
sense,
the
Renewables,
are
getting
they're
getting
paid
for
by
the
taxpayer
as
well
in
an
indirect
sense,
yeah
sure,
okay
and
I
guess
the
cost
of
replacing
facilities
at
this
point
with
the
increased
prices
and
steel
and
concrete,
and
things
like
that,
that
would
probably
be
more
expensive
at
this
point
in
time.
Given
the
inflationary
pressures
on
the
market,
would
it
not.
C
C
There
are
some
that
just
it's
the
way
the
power
plant
is
set
up
or
the
small
location
that
it
may
be
on,
but
but,
as
a
general
matter
to
the
talk
the
conversation
I
had
with
representative
Johnson
when,
when
utilities
do
that
annual
triangle
bind
we'll
look
at,
is
it
easier
just
to
keep
going
and
make
small
investments
in
what
we
have
or
to
completely
replace
it
with
something
something
different?
Ordinarily,
the
the
end
result
of
of
that
review?
Is
it's
easier
and
cheaper
to
keep
what
we
have
open?
Yes,.
H
Okay
and
I
guess,
as
far
as
going
kind
of
in
a
different
direction,
you
know
some
of
the
alternative
sources
of
generation.
They
don't
provide
the
same
number
of
jobs
as
traditional
yeah.
C
Yeah
and
I've
talked
about
this.
Oh
I'm,
sorry
I've
talked
about
this
in
one
of
my
presentations.
It
basically
goes
like
this
nuclear
power
plant,
a
conventional
nuclear
power
plant,
a
coal
plant,
probably
one
of
these
new
nuclear
plants
that
they're
talking
about
a
natural
gas
plant
and
then
probably
wind
and
solar
towards
the
bottom.
That's
right.
H
C
They
certainly
they
I,
think
the
the
term
that
we've
been
using
we've
been
talking
about
stuff
with
batteries
Renewables
is,
is
they
have
a
limited
duration
and
there
has
to
be
something
there
at
the
end,
when
the
that
duration
stops.
Okay,.
H
I
I
met
with
some
some
some
folks
in
the
co-ops
to
go
back
to
them
and
and-
and
we
had
some
discussions,
do
you
believe
it
would
be
possible
to
draft
legislation
that
would
exclude
them
from
any
type
of
securitization
Provisions,
given
their
different
operating
model?
So.
C
So
two
answers:
I,
don't
mean
to
be
anything
is
possible.
We.
D
C
All
follow
our
dreams,
right,
I,
I,
think
I.
Think
it's
certainly
possible.
You
know
the
the
whether
it's
special
legislation,
whatever
other
concerns,
I'm,
not
a
I
practice
utility
law.
So
I
can't
speak
on
the
other
issues,
but
I
think
that
I
think
the
reality
is
that
securitization
makes
sense.
When
you
talk
about
is
switching
out.
Equity
returns
for
debt
return,
a
debt
return
and
Equity
return,
and
the
reality
is
that
co-ops
don't
have
Equity
returns.
H
Okay,
and
do
you
believe
it
would
also
be
possible
to
craft
legislation
that
would
have
certain
Protections
in
there
to
prevent
for-profit
utilities
or
invest
our
own
utilities
from
accelerating
the
decommissioning
of
their
traditional
fossil
fire
plants
in
such
a
way
that
you
know
that
that
would
not
be
a
I
guess.
C
C
And
that's
the
representative
I
didn't
answer
it
fairly
well,
representative
Johnson,
but
that
the
the
idea
is
that
securitization
is
something
that
comes
after
you've
determined
what
the
economic
path
was.
That's
what
a
lot
of
states
have
done
on,
especially
with
power
plants
is.
Is
it
economic
in
isolation
to
retire
this
power
plant?
Okay?
That
decision
has
been
made
now,
let's
make
it
as
cheap
as
possible
for
customers.
Okay,.
H
And
I
think
this
goes
along
something
that
chairman
Gooch
stated
from
the
standpoint
of
maybe
do
using
this
as
a
a
form
to
mitigate
the
impact
of
old
debt
on
something
like
the
Big
Sandy
power
plant
with
Kentucky.
C
H
Would
this
be
the?
Would
that
be
the
ideal
situation
upon
which
to
use
this
mechanism.
C
Yeah
and
again
an
artfully
answered
representative
Johnson's
question
I
mean
Big.
Sandy
power
plant
was
retired.
That
decision
was
made
10
years
ago.
It's
been
on
the
ground
for
four
five
six
years.
At
this
point,
it
is
anticipated
to
that
regulatory
asset
is
being
paid
off
between
now
and
2040,
and.
C
H
H
And
finally,
I
guess
this
was
I
was
told
by
some
some
Representatives
I
met
with
that
that
they
feel
within
maybe
278
300
that
that
the
PSC
already
has
the
authority
to
order
securitization
if
they
thought
it
was
in
the
best
interest
of
the
rate
payers.
Do
you
feel
that
that's
accurate
or
I.
B
B
H
Same
time,
I'll
ask
in
in
the
most
hypothetical
legal
sense.
C
C
There
are
certain
promises,
I,
don't
know
the
public
for
one
of
the
things
that
happens
in
this
legislation
is
that
the
debt
is
the
lenders,
have
a
security
interest
in
the
debt
I,
don't
know
how
we
authorize
that
just
using
krs-278
300,
which
just
says
we
have
to
approve
people's
debt,
there's
a
lot
there
this
this
idea
that
a
a
securitization
order
once
it
is
approved
and
the
re-hearing
is
up
and
it
can
never
be
touched
again.
C
I,
don't
I,
don't
know
that
we
can
I
I,
don't
know
that
we
can
do
that
right
right
now.
The
law
is
that
all
of
our
orders
are
in
effect
until
modified
or
rejected
or
appealed
and
overturned,
and
so
that
that
would
be
certainly
different.
A
different
scenario.
E
C
No,
no,
no,
sir,
so
it
is
and
I.
This
is
one
of
those
details
that
I
left
out.
So
it's
it's
not
no
I
it
is.
It
is
separate
from
the
utilities.
It
is
not
on
the
utilities,
books,
I,
guess
it's
the
most
direct
way
to
say
it
now
at
least
one
of
the
credit
rating
agencies
right
has
a
perception
and
treats
it
as
if
it's
the
utilities
debt,
but
that's
just
because
of
the
rights
of
the
of
the
different
shareholders,
but
it
is
not
on
the
utilities,
books.
C
Presented
today
so
I
I,
again
I
struggle
to
say
what
you
know.
I'll
say
it
this
way
that
the
very
simple
statutory
scheme
that
we
have
today
that
says
that
we
have
to
approve
utilities
debt
before
they
incur.
It
is
markedly
different
and
far
less
complex
than
the
scheme
that
the
other
20-something
27
26
states
have
created.
For
that
require
that
were
required
for
securitization,
so
I'd
be
hard-pressed
to
say
something
is
you
know,
pre-judge
and
say
that
it
you
can't
do
it
under
the
Curt,
but
I'm
I.
C
I
think
I'd
find
it
hard
to
believe
that
somebody
would
lend
the
money
with
the
same
sort
of
of
protections
that
other
states
have
granted
with
what
we
have
to
offer
them
at
the
same
rates
and
the
lower
you
can
the
the
more
certainty
you
can
give
those
lenders,
the
lower
the
cost
for
the
customers
is
going
to
be.
That's
I
think
that
that
would
be
the
whether
it's
necessary
or
not
I'd
hate
to
pass
on,
but
I
would
say
that
if
you
want
the
lowest
absolute
rate,
that
securitization
legislation
is
probably
necessary,.
A
G
I'm,
going
back
to
the
retirement
of
the
Big
Sandy
power
plant,
the
cost
to
add
insult
to
injury
of
of
the
war
on
coal
in
Eastern
Kentucky,
they
put
the
cost
of
the
decommission
of
this
plant
upon
the
utility
payer.
The
customers
bill,
I
I
was
shocked
when
I
found
out.
I
I
went
to
look
at
that
tax
and
it
was
a
large
tax
when
they
first
started.
G
Putting
it
on
there,
when
I
called
to
find
it
out,
find
out
what
it
was
when
I
learned
that
it
was,
the
customers
were
paying
the
cost
of
the
the
demolition
of
the
Kentucky,
Power,
Plant
and
and
I'm.
Hearing
that
it's
going
to
be.
This
tax
is
going
to
be
on
their
bill
until
2040..
That's.
C
That
correct
so
and
I
I
it
was
either
2012
or
2013.
There
were
two
cases
back
to
back,
but
in
those
cases
the
decommissioning
rider
was
approved
through
the.
What
would
have
otherwise
been
the
remaining
life
of
the
asset,
which
was
2040.
C
G
That's
that's
pretty
pretty
pretty
slap
in
the
face
to
the
people
of
Eastern
Kentucky
to
shut
the
plant
down
to
start
with,
but,
secondly,
to
make
them
pay
for
the
demolition
of
the
plant.
So
yeah.
C
And
there's
pretty
much
it
gets
worse.
It
gets
worse
than
that.
The
I
think
the
the
school
district
in
the
county
that
it
was
located
in
received
I
think
close
to
a
million
dollars
a
year
in
annual
taxes
from
the
facility
that
went
to
effectively
zero.
H
Senator
wheeler
just
briefing
Mr
chairman.
Thank
you
Kent.
If,
if
if
we
were
to
pass
a
securitization
bill
that
gave
you
the
authority
necessary
to
to
securitize
these
decommissioning
costs
like
the
Big
Sandy
power
plant,
what
type
of
savings
could
you
see
for
the
rate
payers
of
Eastern
Kentucky
with
that
kind
of
mechanism.
E
H
What
would
you
think
that
how
this
would
impact
their
bills
in
a
realistic
sense,
yeah.
C
So
I
I
hate
that
I
don't
have
the
numbers
in
front
of
me
and
I
I
I
wish
I
would
have
thought
to
bring
the
numbers
the
back
of
the
napkin
kind
of
thing.
But
realistically,
let's
just
say
you
securitized
the
Big
Sandy
retirement
Rider
next
year,
assuming
interest
rates
don't
rise
any
more
than
what,
which
is
the
craziest
assumption
they're
going
to
raise
raise
more.
They
went
up
another
study
by
baseball
yesterday.
C
I
mean
we're
talking
a
magnitude
of
it
would
save
annually
millions
of
dollars
a
year
for
Kentucky
power
rate
payers,
I'd
say
it
I'd
venture
to
say
it
would
be
close
to
seven
nine
ten
million
dollars
a
year
per
year
each
year
for
the
next
18
years,
17
years.
That's
just
that!
That's
a
I'm
sort
of
doing
the
Middle
math
on
that,
but
I
would
I'm.
C
A
C
Yeah
and
I,
just
just
real
quick,
because
I
I
boy
do.
We
know
we
see
bills,
we
see
our
own
bills,
we
see
the
we
get
calls
from
folks,
one
of
the
things
that
Senator
Smith
was
kind
of
asking
about.
Look
we're
the
retail
rate
regulator.
C
The
majority
of
the
costs
that
we
let
utilities
incur
we
don't
have
any
control
over
in
the
utility
in
large
part,
doesn't
have
any
control
over
right,
we're
just
the
suckers
that
get
stuck
at
the
end
having
to
say
what
rates
ought
to
be
so
I
just
want
to
talk
a
minute.
You
all
know
what's
happening
globally
nationally
and
all
these
different
issues
and
and
how
it
ends
up
in
different
bills
is
is,
is
is
important.
C
So
just
a
couple
things
and-
and
all
these
are
are
implicated
by
the
the
volatility
the
first
I'm
just
gonna
talk
about
two
of
them,
primarily
the
first
and
the
third
thing
here.
C
The
fuel
adjustment
Clause
that
electric
utilities
have
in
the
state
and
the
gas
cost
adjustments
that
our
Gas
Utilities
have
the
fuel
adjustment
Clause
has
been
as
a
regulation
has
been
in
effect
for
40
years,
but
the
fuel
adjustment
calls
is
a
60
or
70
year
old
mechanism,
I
guess,
I'd
call
it,
and
it
literally
is
a
line
item
on
utilities
bills
where
they
pass
through
to
customers.
The
incremental
or
decremental
amount
of
fuel
or
purchase
power
costs
that
they
incurred
in
the
last
couple
of
months.
C
Fuel
costs
to
make
up
a
significant
portion,
as
you
can
imagine,
of
utilities
bills,
and
just
to
give
you
an
idea
of
the
magnitude
Kentucky
Utilities
who's,
the
largest
utility
in
the
state.
They
had
1.64
billion
dollars
in
sales
in
2021
about
a
third
of
that
is
reflective
of
just
the
amount
of
fuel,
just
the
cost
of
fuel
that
they
had
to
to
buy
in
order
to
generate
that
power
and
2021
was
not
terrible
for
fuel
costs
not
like
2022.
C
Certainly,
there
was
about
a
10
or
12
year
period,
where
fuel
costs
were
pretty
stagnant.
Where
that's
not
us,
that's
not
happening
anymore.
So
how
it
works,
it's
a
just
a
set
amount
based
on
a
baseline.
We
require
utilities
to
fully
fully
document
all
their
fuel
costs.
We
allow
utilities
to
pass
through
the
cost
that
they've
recently
incurred
and
all
of
it
at
the
end
is
subject
to
review
at
six
month
and
two
year
periods.
So
we
don't
review
the
costs
at
the
time.
C
The
utility
passes
it
through
to
customers
if
they
did
something
wrong
or
they
should
have
done
something
differently.
We
make
them
give
that
cost
back
to
customers
in
one
of
those
review
periods,
either
the
six
month
or
two
year
review
periods,
but
nothing
they
do
in
the
fac
effectively
evades
our
evades
our
review
to
ensure
that
something
wasn't
improper
or
that
something
wasn't
calculated
appropriately.
Gas
cost
adjustments
are
very
similar
for
Gas
Utilities.
C
These
are
not
in
regulation
instead,
they're
in
the
Tariff.
These
are
kind
of
in
the
tariffs.
The
same
way
that
the
fuel
adjustment
calls
was
before
we
put
it
in
regulation.
All
those
years
ago,
utilities
Gas
Utilities
come
in
and
file
these.
These
updates
on
a
prospective
basis
for
the
next
quarter.
C
They
include
new
gas
cost
and,
over
or
under
recovery
of
whatever
their
gas
cost
adjustment
was
the
last
period
the
difference
between
what
they
expected
gas
to
cost,
what
it
ended
up
actually
costing
and
then
a
provision
for
balancing
for
the
remainder
of
it.
So
I
just
want
to
give
you
an
example
and
I
only
picked
these
utilities.
These
are
I,
say
I
picked
them
randomly
alphabetically
they're
they're,
the
first
two
for
electric
for
gas,
so
for
Atmos.
C
Just
to
give
you
a
magnitude
of
the
cost
that
they're
incurring
in
order
to
procure
fuel
for
customers,
the
gas
cost
recovery.
This
is,
in
addition
to
base
rates
the
customer
charge
and
everything
else.
This
is
just
for
the
commodity
of
gas.
In
October
of
2020
they
were
charging
customers,
3.91
cents
per
mcf
average
customer
uses
five
or
six
mcf
a
month
in
October
of
2022.
That
amount
is
9.58
two
and
a
half
times
almost
three
times
more
for
for
fac.
Now
the
fac
is
a
lot
more
volatile.
C
It
can
go
from
a
positive
to
a
negative
in
a
single
month.
There
are
a
lot
more
characteristics,
so
I
don't
want
to
really
scare
anybody
by
this,
but
October
2020.
It
was
actually
a
negative
number.
They
were
giving
customers
a
credit
in
the
fac
that
month
in
October
of
2022,
it
is
four
cents
kilowatt
hour.
Average
Kentucky
Power
customer
uses
a
116,
almost
1200
kilowatt
hours
a
month,
and
so
this
again
is
just
about
passing
through
a
commodity
cost
to
customers.
This
has
nothing
to
do
with
Investments
infrastructure
labor,
nothing.
C
This
is
all
in
addition
to
the
customer
charge
and
everything
else.
It
just
as
easily
could
be
a
negative
number
again
next
month,
but
I
just
wanted
to
give
you
all
an
idea
of
what
those
volatilities
are
and
then
just
real
quick
fuel
issues.
Everybody
knows
the
natural
gas
prices
are
going
up.
The
result
of
that
is
that
natural
gas
units
are
being
operated
less
because
they're
more
expensive.
So
then
coal
started
getting
dispatched
more
often
and
again,
going
back
to
that
supply
and
demand.
C
The
demand
for
coal
went
up,
therefore,
and
the
supply
stayed
about
the
same,
and
so
coal
prices
at
some
point
last
year
were
up
three
or
three
and
a
half
times
what
they
used
to
be.
So
all
of
that
gets
gets
reflected.
The
the
reality
is
at
least
the
majority
of
our
utilities
have
long-term
coal
contracts.
C
At
set
rates
are
fairly
set
rates,
three
four
five
six
seven
year
contracts,
and
so
they
do
see
some
of
our
utilities
see
less
volatility
than
others
in
terms
of
the
cost
of
the
fuel
that
they've
been
incurring
so
I
just
going
back,
you
know:
here's!
Here's
where
generation
options
are
everything
has
a
trade-off.
It
is
not
an
apples
to
Apple
situation.
I,
think
a
lot
of
people
are
putting
their
apples
in
the
basket
of
new
nuclear.
C
B
C
And
then
this
is
just
our
most
recent
current
electricity
Generation
profile,
almost
70
percent,
still
coal
about
a
quarter
of
our
generation
is
natural
gas
and
then
that
Hydro
is
staying
pretty
it
used
to
be
about
five
percent.
Now
it's
up
to
seven
percent.
There
have
been
some
changes
on
the
Kentucky
River
they've
put
some
locks
in
to
create
more
hydroelectricity,
Along,
the
Kentucky
River,
and
that's
been
increasing
that
number
over
time.
C
As
always,
I
just
want
to
say:
I,
probably
bother
Senator,
wheeler
representative
Gooch,
quite
a
bit
talking
to
him
about
these
things
going
about
these
things,
but
you
know
we're
carrying
out
the
right
making
function.
That's
it's
a
legislative
function
right,
we're
doing
you
all
deferred
to
us
on
doing
that
and
anytime.
You
all
have
questions
anytime.
You
have
concerns.
You
want
to
know
about
something
feel
free
to
give
us
a
call
or
let
us
know
or
send
us
an
email
or
have
staff
reach
out
to
us.
A
Okay,
thank
you
Ken,
that
certainly
I
thought
was
a
very
good
presentation
and
I
learned
a
lot
and
that
you
know
when
I
can
come
to
one
of
these
meetings.
I've
been
on
this
chairman
of
this
community
for
about
24
years
and
and
when
I
come
and
able
to
learn
something
I
always
enjoy
that
and-
and
you
certainly
did
a
good
job.
We
appreciate
the
work
that
you
do.
A
Let
me
just
say
that
you
know
you
mentioned
that
a
lot
of
our
utilities
that
are
that
that
use
coal
in
Kentucky
have
had
some
long-term
contracts,
and
it's
really
good
that
they
have
because
I
think
last
committee
there
was
testimony
from
some
people
at
the
cabinet
that
the
average
coal
price
in
Kentucky
was
about
138
dollars,
a
ton
they're
able
to
get
much
more
than
that,
probably
around
200
a
ton,
especially
in
the
export
market
and
other
places
that
don't
have
long-term
contracts,
and
so
hopefully,
for
the
remainder
of
this
year.
A
Those
contracts
will
keep
our
you
know
where
they're
not
having
this
a
large
fuel
adjustment
Clauses
because
of
coal,
but
I
can
tell
you
that
everyone
out
there
is,
for
the
last
few
months
have
been
focusing
on
the
price
of
gasoline
and-
and
we
have
actually
seen
some
gasoline
that
come
down
a
little
bit
for
a
while.
It's
going
back
up,
but
you
know
people
focus
on
that
and
they're
not
focusing
on
you
know.
Diesel
is
not
down.
Propane
is
not
down
home
heating.
A
Oil
is
not
down,
and,
and
I
can
tell
you
that
to
the
people
that
are
going
to
be
on
this
committee
next
year,
once
our
citizens
go
through
this
winter,
with
the
fuel
adjustment
Clauses
and
things
that
they're
going
to
see,
utilities
is
going
to
be
a
much
bigger
issue
when
we
come
back
in
January.
In
my
opinion,
it's
strictly
my
opinion,
but
thanks
to
the
committee
members
I
hope
we
got
most
of
your
questions
answered
and
with
that
we
stand
adjourned.