Energy Efficiency Standards
Kentucky does not have a statewide energy efficiency resource standard (EERS) to require energy efficiency savings from its electricity or natural gas utilities. The Kentucky Public Service Commission may approve demand side management plans proposed by any jurisdictional utility. Plans may include provisions for cost recovery, lost revenue recovery and financial incentives. Energy intensive industrial customers may opt-out from participation in utility EE portfolios.
- Statute: KRS 278.25
Resource Planning
Each electric utility under Kentucky Public Service Commission (PSC) jurisdiction must file a resource plan every three years. Utilities are on a staggered filing schedule so each plan filing is six months after the previous utility's filing. Integrated resource plans have a 15-year forecast timeframe. Utilities are required to consider conservation, load management and demand-side measures as part of their plan to meet future energy needs.
- Rules: 807 KAR 5:058
Rate Structures & Incentives
Cost Recovery
The PSC may provide for full cost recovery of those programs through rates. Efficiency programs can be approved as part of the utility's rate case or as a separate proceeding.
Lost Revenue Recovery
The PSC may approve energy efficiency programs for utilities and can allow utilities to include a customer surcharge to recover lost revenues from approved and cost-effective programs.
Utility Incentives
The PSC has the authority to approve utility incentives for approved and cost-effective demand-side programs.
Noncompliance Penalty
Kentucky does not have a mandatory energy efficiency requirement for utilities and therefore does not have any policies for noncompliance.
Stakeholder Collaboration
Kentucky utilities run their own utility-specific energy efficiency stakeholder groups that may include industry, commercial customers, academics, housing advocates, non-profits, governments, chambers of commerce and others identified by the utilities. These groups bring together key stakeholders within the service territories to address key issues related to utility energy efficiency plans and programs.
Program Evaluation
Cost-Effectiveness Tests
For approval, energy efficiency programs must be shown to be cost-effective, though there is no methodology specified in statute for determining cost-effectiveness.
The PSC determined that having the results from multiple cost-effectiveness tests available provides a broad view of the potential impacts of a proposed program, and ordered that the Total Resource Cost Test (TRC), Rate Impact Measure (RIM), Participant Cost Test (PCT) and Utility Cost Test (aka Program Administrator Cost Test, PACT) are all required to pass for the approval of a new demand-side program, or additional documentation must be provided to justify the need for the program. As with most states, the TRC is the primary screening test for cost-effectiveness.
Net vs. Gross
Kentucky utilities are not required to report net savings or account for free-ridership or spillover effects. They report gross savings for their approved energy efficiency programs. On a utility-by-utility basis, however, utilities do report both gross and net savings and may also use net savings calculations for their program planning.
Technical Resource Manual
Kentucky does not have a statewide TRM for its utilities' energy efficiency programs.
State Energy Plan or Vision
Kentucky released a new state energy plan, KY3: Designs for a Resilient Economy, in 2021. The plan seeks to braid energy, environment and economic development into one unified strategy. Compared to similar state energy plans, the document is fairly light on details and serves more as a guiding vision for state policy as opposed to a strict roadmap. The document does not include any details on energy efficiency, but energy efficiency is mentioned briefly in the energy section.