State News
East Kentucky Power in "precarious financial condition"
PSC demands management audit, provides protection from creditors
FRANKFORT — The financial problems of East Kentucky Power Cooperative, a 16-member, local cooperative-owned electrical provider, put it in “precarious financial condition” and prompted the state Public Service Commission Tuesday to order the utility to supply a “comprehensive management audit.” The PSC also allowed the Winchester-based utility to set up a $12.3 million account for purchasing replacement power.
That account, known as a “regulatory asset,” will keep “creditors at bay for at least one more year, but will not resolve the underlying financial problems” of EKPC, according to PSC Commissioner John Clay who voted against the measure. PSC Chairman David Armstrong and Vice Chairman Jim Gardner voted for it. All of them, however, supported requiring the management audit.
The PSC said in a news release that “the utility’s worsening financial problems raise questions about its continued viability.”
In its order, the PSC said it will grant EKPC to create a separate account to track costs of purchasing power to compensate for unscheduled shutdowns at generating facilities. EKPC said it needs the $12.3 million adjustment to avoid defaulting on credit agreements. That’s the amount the utility spent in 2008 to buy replacement power from other utility generators, which the PSC called “unusually high.”
An independent auditor chosen by the PSC will conduct the management audit but EKPC will pay for it. The findings could be used by the PSC as the basis for PSC recommendations or requirements.
The troubled utility is owned by the 16 distribution cooperatives which buy its electricity to serve about 500,000 customers and each cooperative has a seat on the EKPC board of directors. The PSC statement said the management audit will focus on the role of those directors in management and strategic planning of the utility.
The PSC has previously raised the question of an inherent conflict in the role of EKPC’s directors who “must manage the need to provide EKPC with sufficient revenue to maintain its financial well-being with the desire to maintain low rates for customers” of the 16 cooperatives.
“Ultimately, the responsibility for EKPC’s viability lies firmly within the province of its board of directors who have a fiduciary duty to safeguard the financial and operational viability of the cooperative,” the PSC said in its order.
The press release said the $12.3 million spent on replacement power might affect the utility’s financial bottom line enough to trigger default provisions that could lead to higher interest rates or a cutoff of credit. It went on to say the financial consequences would have to be borne by the distribution co-ops and their customers.
Nick Comer, spokesman for EKPC, said the Winchester utility plans to open another coal-fired generating plant in April which should diminish the need to buy replacement power.
EKPC has a rate increase request pending before the PSC.
- State News
-
-
Philanthropist pushes to paint flaking bridges
What began as a local concern over aesthetics in one Kentucky city, about an aging and unsightly railroad bridge, may have far-reaching implications for towns across the state and nation.
-
Country music singer finds shortcut to success
Bucky Covington's journey into professional music is fairly standard. How he got to national prominence is a little more unusual.
-
Kentucky in running for Race to the Top
Kentucky remains in the running for funding in the second round of Race to the Top, hoping to secure as much as $175 million in funding from the pool of $3.3 billion established as part of the federal stimulus to improve low-performing schools.
-
Money and the magic pill
I was talking to a person in the medical profession who said, “It seems like some patients are looking for a magic pill that will solve all their problems.”
-
Bluefield College winds down summer of camps
-
Financial reform hurts poor people
“At the dark end of the street,
That’s where we’ll always meet.”
— Gram Parsons
One the insights that I got from Gary Rivlin’s “Broke USA” is that people often use payday lenders because they don’t have access to traditional banks. -
Lawmakers look at prison problems
Lawmakers may be serious about addressing the rising costs and populations of the state’s prison and jail system.
-
Is Kentucky sentencing kids to ‘Life or Meth?’
I walked by a car in a parking lot that had a sticker on it that read, “Drug Courts Work.”
-
Beshear makes vetoes to budget
Gov Steve Beshear vetoed a measure in the state budget which would have reduced the salary of Economic Development Secretary Larry Hayes late Friday along with 18 other line-item vetoes. He also issued seven line-item vetoes in the road plan.
-
Birthday party in Frankfort
The state capitol is having a birthday party this weekend and you¹re invited. The venerable domed capitol building officially opened on June 2, 1910 and the state is throwing a 100th birthday party Friday evening and Saturday.
- More State News Headlines
-
Philanthropist pushes to paint flaking bridges
