Energy Efficiency Policies and Practices in Kentucky

Utility Sector

Utility sector policies are those policies that directly affect the way that the state's electricity and natural gas utilities do business and serve the energy needs of their customers.  These policies include utility forecasting and planning requirements for energy efficiency, requirements for energy efficiency delivery to customers, regulatory mechanisms to determine utility revenues for energy efficiency services, processes for working collaboratively with other utilities and energy stakeholders to advance energy efficiency, requirements for evaluating energy efficiency programs and portfolios, and policies to promote the development of the next generation of energy grids.

Resource Planning

Integrated Resource Planning in Kentucky is governed by 807 KAR 5:058. Each electric utility under the Commission's jurisdiction must file a plan every three years. Utillities 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 by Section 8.2(b) to consider conservation, load managment, and demand-side measures as part of their plan to meet future energy needs.

► Overview of Resource Planning policies in the Midwest

Energy Efficiency Standards

Electricity & Natural Gas

Kentucky does not have a statewide energy efficiency portfolio standard to mandate energy efficiency requirements for its electricity or natural gas utilities.

► Overview of Efficiency Standards policies in the Midwest

Rate Structures & Incentives

Cost Recovery

Under the authority of KRS 278.285,  the Commission may approve energy efficiency programs for utilities and provide for full cost recovery of those programs through rates under Section (2)(a). Efficiency programs can be approved as part of the utility's rate case or as a separate proceeding.

Lost Revenue Recovery

Under the authority of KRS 278.285,  the Commission may approve energy efficiency programs for utilities and can allow utilities to include a customer surcharge to recover lost revenues from approved, cost-effective programs under Section (2)(a).

Utility Incentives

Under the authority of KRS 278.285,  the Commission may approve energy efficiency programs for utilities and has the authority to approve utility incentives for approved, cost-effective demand-side programs under Section (2)(b).

Noncompliance Penalty

Kentucky does not have a mandatory energy efficiency requirement for utilities and therefore does not have any policies for noncompliance.

► Overview of rate structures & incentives in the Midwest

Stakeholder Collaboration

Kentucky utilities run their own utility-specific stakeholder groups that may include industry, commercial customers, academics, housing advocates, non-profits, governments, and chambers of commerce, and others identified by the utilities. These groups bring together key stakeholders within the service territories to address utility plans and programs.

Under the Kentucky Department of Development & Independence (DEDI), the stakeholder group Developing a Kentucky Action Plan for Energy Efficiency has been formed from utilities, government officials, commercial and industrial customers, non-profits, and academic organizations as a collaborative statewide effort to develop recommendations to spur investment in energy efficiency in the state. This stakeholder group is facilitated by MEEA and Smith Management Group through a grant from DEDI.

► Overview of stakeholder collaboratives in the Midwest

Program Evaluation

Cost-Effectiveness Tests

For approval under KRS 278.285, energy efficiency programs must be shown to be cost-effective, though that statute does not specify methodology for determining cost-effectiveness. 

In their Order in Case 97-083, the Commission determined that having the results from multiple cost-effectiveness tests available has "in fact provided a broad view of the potential impacts of a proposed program," and has ordered that the Total Resource Cost Test (TRC), the Rate Impact Measure (RIM), the Participant Cost Test (PCT), and the Utility Cost Test (renamed 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 test is the primary screening test for cost-effectiveness.

Net vs. Gross

Kentucky utilties 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.

► Overview of efficiency program evaluation in the Midwest

Smart Grid

The Smart Grid Information Clearninghouse identifies the following smart grid projects in Kentucky:

Recovery Act-funded smart grid projects that benefit Kentucky, as identified on SmartGrid.gov include:

► Overview of smart grids in the Midwest


Read the report that accompanies these pages:
Energy Efficiency Policies, Programs, and Practices in the Midwest:
A Resource Guide for Policymakers (2014 Edition)

►more information about the Resource Guide