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Kentucky Power's Update on Termination of Sale Agreement and Future Strategies

Kentucky Power and Liberty mutually agreed to terminate a proposed sale due to various reasons, leading to a reevaluation of short- and long-term strategies. Despite challenges like customer loss and increased costs, the company aims for economic development, energy efficiency, and community partnerships. Short-term focus includes securitizing rate base, low-income programs, and community support, while long-term strategies prioritize economic growth grants, energy efficiency improvements, and demand-side management programs.

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Kentucky Power's Update on Termination of Sale Agreement and Future Strategies

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  1. Kentucky Power June 8, 2023 Update Natural Resources and Energy Interim Joint Committee

  2. Termination of Sale Agreement • On April 17, Kentucky Power and Liberty announced the mutual agreement to terminate proposed sale • No single reason, but passage of time, including extended Federal Energy Regulation Commission review, ultimately led the parties to agree to terminate • AEP and Kentucky Power are committed to eastern Kentucky and are reevaluating both short- and long-term strategies

  3. Regional Situation • Since 2008, Kentucky Power has lost over 11,400 customers and experienced a 26% overall reduction in sales • Generally speaking, sales represent the denominator in utility rate making. Thus, loss of load directly correlates to increased rates for remaining customers • Kentucky Power customers use more electricity than the national average • With inflation, labor and material costs have increased, with some materials increasing in cost by as much as 50% • Constant challenge to balance the ability to pay with need for improved infrastructure

  4. Strategy Short-Term • Securitizing large portion of rate base • Focus on low-income programs • Community support Long-Term • Economic development • Energy efficiency • Partnering to improve the region

  5. Short-Term • Kentucky Power is sensitive to the needs of our customers • Reviewing current policies to expand low- income programs • Willingness to work with customers through payment arrangements, budget billing, energy assistance programs, etc.

  6. Securitization • Because of the company’s ability to use securitization with SB192, rate impact will be reduced • Rate relief from securitization will come in two forms: reduced financing costs and ability to spread costs over a longer period

  7. Long-Term • Economic Development – Kentucky Power Economic Growth Grants (K-PEGG) – Tariff options to attract and retain industry – Dedicated employees – Supporting local economic development organizations • Partnering to help with housing and energy efficiency • Expanding demand-side management programs

  8. Economic Development • Kentucky Power revamped its economic development efforts in 2012; economic development is the long game • Much of Kentucky Power’s efforts have been in the areas of site and building development, workforce training, and supporting regional economic development organizations • Ensure that sites are ready when businesses are ready to locate; colleges are training the workforce that meets the needs of the businesses Success Story K-PEGG allowed Johnson County Fiscal Court to create the Hager Hill industrial site. K-PEGG funds helped the site achieve Build-Ready status from the Kentucky Cabinet for Economic Development. That status was instrumental in Johnson County’s Kentucky Product Development Initiative award to purchase adjacent property; doubling the size of the industrial park. Johnson County has already marketed the site and has a potential tenant.

  9. Energy Efficiency/Housing • Housing in eastern Kentucky is in need of extreme improvements in weatherization and efficiency • Kentucky Power is committed to telling the story and enlisting help to improve housing and energy efficiency • Targeted Energy Efficiency for weatherization for income- qualified customers • Kentucky Power demonstrates its commitment through the AEP Foundation contributions for housing: Christian Appalachian Project Build Ashland Housing Development Alliance

  10. Promoting the Region • Systemic issues in eastern Kentucky require partnerships to cure • Kentucky Power strives to be part of the solution

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