LG&E Energy Corp. utility subsidiaries Louisville Gas andElectric and Kentucky Utilities received orders from the KentuckyPublic Service Commission (PSC) implementing performance-basedratemaking (PBR) effective July 2.

As part of an amended LG&E PBR filing, LG&E also agreedto refrain from filing for an increase in gas rates through June30, 2004. The amendment requested PSC approval of a five-year billreduction plan, which would reduce electric costs by $20 million inthe first year (beginning July 1), and by $8 million annually foreach of the next four years through June 30, 2004, for a totalfive-year savings to customers of $52 million. The reductions willbe distributed 47% to LG&E and 53% to KU customers.

The commission is expected to issue a final PBR ruling laterthis summer. The amended PBR filing calls for LG&E and KU toextend for an additional year (through June 30, 2004) both the ratecap and the merger-savings credit the utilities established as partof their earlier merger plan. Under the rate cap, the companiesagreed, in the absence of extraordinary circumstances, not toadjust base electric rates for five years following the merger.They also agreed to a monthly credit to customer bills reflectingthe 50% share of the non-fuel merger savings allocated to customersin the first five years following the merger.

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