Electric utilities could finance approved costs through bonds and surcharges

An electric utility may ask the Public Service Commission for an order allowing bonds to finance commission-approved securitized costs. Covered costs include retired generation costs, certain storm and regulatory assets, and unrecovered costs from qualifying fossil-fuel plants outside Kentucky. The commission must find that the application serves the public interest and that the resulting surcharge and other rates are fair, just, and reasonable. For retired generation costs or qualifying out-of-state plant costs, the utility must have filed since January 1, 2026, to build or acquire in-state dispatchable generation. For those same costs, the utility must agree not to seek a base-rate increase that would take effect during the two years after filing the financing application. A financing order must be issued within 180 days after the application is filed if the application is approved and any conditions are met.

After a financing order and bond issuance, the utility must add a monthly surcharge to customer rates and update it at least twice a year. The surcharge applies to existing and future retail customers receiving electric service from the utility or its successors or assignees, including customers receiving distribution service. The surcharge is nonbypassable, meaning customers generally may not avoid paying it, and it must be collected separately from regular tariff rates. The utility must show the applicable surcharge amount on customer bills and identify the owner of the surcharge rights if those rights were transferred. Updates may recover only approved bond principal, interest, financing costs, redemption premiums, and other approved bond-related charges. The tariff and surcharge begin after the commission issues the financing order and the bonds are issued; surcharge updates must be filed at least semiannually thereafter.

The Public Service Commission must set an expedited review schedule and may hire outside advisers, while the applicant pays the related costs. The review covers financing-order applications and bond transactions, including applications that are denied or withdrawn or bonds that are never issued. The commission must decide an application and issue a financing order, if approved, within 180 days after filing. Outside counsel and advisers may not have an interest in the bonds or direct their marketing. The applicant pays adviser and counsel costs, which are assigned to the transaction and generally capped at $750,000, with inflation adjustments allowed after 2026. If an application fails or bonds are not issued, the applicant still pays these costs, subject to commission approval for later recovery. The 180-day decision period starts when the application is filed; issuance advice letters are due no later than three business days after bond pricing.