As previously reported, Rep. Jim Gooch, D-Providence filed a bill last month that would have prohibited utilities from utilizing the “fuel adjustment clause” which allows power companies to automatically adjust energy rates when the cost of fuel varies.
The issue was brought up during this legislative session because utility companies like Louisville Gas & Electric are considering switching from coal to natural gas now that the latter’s price is at record lows. The fuel adjustment clause subsidizes such a move since power companies wouldn’t have to lose any sleep over the price of natural gas increasing above that of coal during the change-over – they’d be able to automatically jack up rates if such a scenario occurred. Prohibiting the fuel adjustment clause would do just the opposite: subsidize coal.
In the end, it looks like the natural gas subsidy won out. After LG&E officials testified against the bill, Rep. Gooch said he would not call for a vote on the measure.
And why wouldn’t LG&E testify against HB 110? Nullifying the fuel adjustment clause would make the risk of losses in the face of varying fuel prices that much higher for LG&E – especially since they are planning to replace their coal-fired generating unit at Cane Run power station in Jefferson County with a natural gas-fired unit.
So once again, we see an instance of crony capitalism deciding the fate of an industry – at least in part. LG&E wants the fuel adjustment clause to stand, and so it will.