Louisville, Kentucky (Platts)--20Dec2012/725 pm EST/025 GMT

Electric and natural gas rates for customers of Kentucky's two largest utilities, Louisville Gas & Electric and Kentucky Utilities, will rise January 1 by a combined nearly $100 million annually under a rate settlement approved Thursday by the state's Public Service Commission.

That represents about 60% of their original June request.

LG&E's base electric rates will climb by $33.7 million, or 4.8%, down from an originally requested $62.1 million, while KU's base electric rates will increase by $51 million, or 5.8%. KU initially sought $82.4 million. In addition, LG&E's base gas rates will go up by $15 million, or 7.3%. It originally asked for $17.2 million. KU does not have any gas customers.

The return on equity is 10.25% for the companies, both PPL subsidiaries.

In November, the two utilities reached a settlement with key stakeholders, including Attorney General Jack Conway, the Kentucky Industrial Utility Customers trade group, Kroger Co., the Kentucky School Boards Association and advocates for low-income customers.

The new rates will help pay for the new $1.2 billion Trimble County 2 coal unit. The 750-MW facility is located at the site of the 547-MW Trimble County baseload coal plant along the Ohio River about 50 miles east of Louisville.

KU and LG&E serve more than 930,000 customers combined and own about 8,000 MW of generating capacity, mostly coal-fired.

--Bob Matyi, newsdesk@platts.com --Edited by Jason Lindquist, jason_lindquist@platts.com