Policy & Regulation

Kentucky Power sale by AEP to Algonquin Power unit falls apart

AEP said it now plans to file a base rate case in Kentucky in June with new rates taking effect in January 2024.

American Electric Power scrapped plans to sell its Kentucky Power operations for $2.6 billion to a unit of Canada-based Algonquin Power & Utilities, saying that the deal could not be closed by an April 26 deadline.

In December, the Federal Energy Regulatory Commission denied approval of the sale, citing insufficient evidence to show the transaction wouldn’t affect customer rates. The agency outlined the additional information about customer protections needed to obtain approval.

In mid-February, AEP and Algonquin business unit Liberty Utilities filed a new application with the commission and asked that approval be granted by April 26.

Liberty pledged to take several measures during the next five years, including maintaining the return on equity, maintaining the current cost cap on equity, financing future credit investment at the current credit rating, and capping certain operating and administrative costs. 

Earlier, AEP had agreed to shave around $200 million off the purchase price after conflicting regulatory decisions sent the deal back to the negotiating table.

Last May, Kentucky utility regulators approved the acquisition, but required changes to the proposed operating and ownership agreements related to the 1,632 MW Mitchell coal generating facility in which Kentucky Power owns a 50% interest. On July 1, West Virginia regulators issued their own order on the power plant that differed from the Kentucky regulatory action. 

The discrepancies led AEP and Liberty to renegotiate the sales agreement, which both sides announced on September 30. 

Liberty Utilities had originally agreed to buy the assets for around $2.85 billion, including some $1.221 billion in debt.

In an April 17 press release, AEP said it now plans to file a base rate case in Kentucky in June with a six-month expected commission approval process, and new rates taking effect in January 2024. The company said it also planned on “right-sizing its rate base” including securitizing retired coal assets through the Kentucky commission’s hoped-for approval to reduce rates.

AEP also named Cindy Wiseman as Kentucky Power president and chief operating officer. AEP earlier had said that Brett Mattison, president and COO of Kentucky Power, would take on a similar role at Southwestern Electric Power Co., effective Jan. 1. Mattison succeeded Malcolm Smoak, who retired. 

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