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East Kentucky Power Cooperative (EKPC)

Another Troubled Co-op:

• In December 2008 the precarious financial condition of EKPC led the state Public Service Commission (PSC) to order the utility to supply a comprehensive management audit. The audit will be performed by an independent auditor chosen by the PSC, but will be paid for by EKPC. The management audit will focus on the role of the board of directors in management and strategic planning. EKPC is owned by 16 distribution cooperatives which buy electricity to serve about 500,000 customers. Each cooperative has a seat on the EKPC board of directors.

• At issue is 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.

• The PSC also allowed the utility to set up a $12.3 million account for purchasing replacement power, which will keep creditors at bay for at least one more year, but will not resolve the underlying problems. EKPC says the $12.3 million adjustment is needed to avoid defaulting on credit agreements. This account will be kept separate in order to track costs of purchasing power to compensate for unscheduled shutdowns at generating facilities. The PSC calls the $12.3 million spent in 2008 to buy replacement power from other utility generators unusually high and, in a news release, raised questions about the co-op’s continued viability.

• The PSC also said that in the event the $12.3 million spent on replacement power affects the financial bottom line enough to trigger default provisions leading to higher interest rates or a cutoff of credit, the financial consequences will have to be borne by the distribution co-ops and their customers.

• A spokesman for EKPC said the utility plans to open another coal-fired generating plant in April 2009, which should diminish the need to buy replacement power.

• EKPC had a rate increase pending before the PSC as of December 2008.

• Lobbying expenditures by EKPC

  2008 $60,000

  2007 $80,000

  2006 $50,000

  2005 $60,000

  2004 $100,000

• July 2007 – The Dept. of Justice and the U.S. Environmental Protection Agency announced that EKPC had agreed to spend approximately $650 million on pollution controls and pay a $750,000 penalty to resolve violations of the Clean Air Act at its three plants.

• September 2007 – In a landmark settlement, EKPC agreed to pay an $11.4 million penalty to resolve violations of the Clean Air Act’s acid rain program. The settlement requires that the company take steps to reduce approximately 400 tons of harmful emissions each year and offset another approximately 20,000 tons of emissions released from its Clark County, KY facility without a permit.

Sources:

http://www.mccrearyrecord.com/statenews/local_story_359120423.html

http://www.opensecrets.org/lobby/clientsum.php?year=2008&lname=East+Kentucky+Power+Cooperative&id=

http://www.epa.gov/compliance/resources/cases/civil/caa/eastkentuckypower.html

http://www.epa.gov/compliance/resources/cases/civil/caa/eastkentuckypower-dale0907.html

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