Louisville Gas & Electric just filed a tariff revision that would change the primary voltage threshold from 4kV to 5kV for their Schedule TOD-P rate. This affects about 40 customers in our territory, including several that are right at the 4.16kV level. LG&E claims it's to align with industry standards, but it looks like a revenue grab to me. Anyone else seeing utilities raise these thresholds? The rate difference is substantial - about 12% higher demand charges on secondary rates.
LG&E changing primary voltage definitions - 4kV to 5kV threshold
TVA has been talking about something similar here in Knoxville. They're reviewing all their voltage classifications as part of the new rate design process. Word is they want to standardize everything at 5kV minimum for primary service. The problem is a lot of older industrial customers were built around 4.16kV systems and can't easily upgrade their service voltage without major infrastructure changes.
Idaho Power actually went the other way - they lowered their threshold from 5kV to 2.4kV last year. Their reasoning was that customer-owned transformers provide the same cost savings to the utility regardless of the specific voltage level. As long as the customer owns and maintains the transformation equipment, they should get the primary discount. Made sense to me, and it saved our clients about $85,000 annually.
PNM here in Albuquerque uses 4kV and hasn't shown any interest in changing it. But we've had issues with their interpretation of 'customer-owned.' They want to see not just ownership of the transformer but also all protective equipment, switchgear, and metering equipment. It's getting harder to qualify for their Schedule 6 primary rates even at higher voltages.
The protective equipment issue is huge. LG&E is also requiring customers to own all protective relaying and fault interruption equipment. For some of our clients, that means buying equipment from LG&E that could cost $50,000 or more just to maintain primary rate eligibility. At that point, the payback period makes it questionable whether it's worth staying on primary rates.
I've been tracking these threshold changes across the Southeast. Most utilities are moving toward 5kV or higher, and I think it's definitely revenue-driven. The cost justification studies I've seen don't support these changes from an engineering perspective. Customer-owned 4.16kV transformers provide the same cost savings as 12.47kV systems. We need to start challenging these changes more aggressively at the commission level.
Randy, do you have any of those cost studies you could share? We're preparing comments for the PSC hearing on LG&E's tariff revision. It would be helpful to show that other utilities haven't found engineering justification for raising voltage thresholds. The hearing is scheduled for April 15th and we need all the ammunition we can get.
I'll send you what I have. Also check with the Industrial Energy Consumers group - they've been collecting data on this issue across multiple states. The key argument is that voltage level alone shouldn't determine cost causation. What matters is who owns and maintains the transformation equipment and whether the utility avoids distribution costs.
We filed intervener status on a similar case with the Tennessee commission last year. TVA was proposing to eliminate primary discounts entirely for customers below 12.47kV. The commission rejected it after we showed that customer-owned transformers at any voltage level provide measurable cost savings through reduced distribution losses and avoided infrastructure investments.
Update: LG&E agreed to grandfather existing customers at 4kV for five years, but new installations will need 5kV minimum. It's not ideal but gives our clients time to plan for potential service upgrades. The commission seemed receptive to arguments about stranded costs for existing customer equipment. Thanks everyone for the input and documentation.
That's a reasonable compromise. The grandfathering provision acknowledges that customers made investment decisions based on existing tariffs. Five years should be enough time for most facilities to evaluate whether upgrading service voltage makes economic sense or if they're better off accepting secondary rates when the grandfather period expires.