Kicking the can down the road 

March 27, 2025

As seen on LaReg Corp’s docket tracker Kentucky Power Company (KPC, an AEP company) has filed an application with the Kentucky Public Service Commission, Case #2025-00031, requesting approval to defer approximately $11 million in extraordinary operations and maintenance (O&M) expenses resulting from two major storms on January 5 and February 15, 2025. Without this deferral, KPC would need to expense these costs in the first quarter, potentially impacting its financial metrics and credit ratings, which could lead to higher financing costs and affect customers. Similarly, Southwestern Public Service Company (SPS, an Xcel company) filed a request in Texas to defer accounting treatment of excess liability insurance expanses, docket 57856. These accounting requests were typically uncommon.

Accounting orders, offer a more expedient alternative to traditional base rate cases, which can take up to a year to conclude. For instance, in Massachusetts, NSTAR Electric Company (now part of Eversource) filed for an accounting order on November 28, 2002, in D.T.E. 02-78, to address a potential $200–$300 million write-off related to pension costs influenced by stock market fluctuations and interest rate forecasts. The Massachusetts Department of Telecommunications and Energy approved the order by December 31, 2002, allowing NSTAR to implement a pension tracker mechanism to equitably manage pension expense volatility between the utility and its customers.

AEP and Xcel’s current request aims to mitigate the immediate financial impact of the recent storm-related expenses by deferring them as a regulatory asset, subject to regulatory approval. This approach is intended to preserve the company’s financial stability and maintain favorable credit ratings, ultimately benefiting customers by avoiding potential increases in financing costs.