Yesterday, a united front of ratepaying alliances throughout Alaska signed a letter petitioning the US Department of Agriculture’s Inspector General regarding federal funds offered to utilities in Kentucky. Signees include Golden Valley Electric Association Ratepayers Alliance, Matanuska Electric Association Ratepayers Alliance, and Homer Electric Association Member’s Forum, as well as Alaska Federation for Community Self-Reliance and Utility Watch. Ratepaying members fear what goes on in the Lower 48 may not be too far off from what can happen in their backyards

Alaskans joined efforts of 11 rural electric cooperatives in Kentucky in asking the Inspector General’s office of the U.S. Department of Agriculture to formally review the agency’s decision to approve up to $900 million in lien accommodations to East Kentucky Power Cooperative, which generates the electricity the co-ops buy.

East Kentucky Power Cooperative is seeking permission from the Kentucky Public Service Commission to borrow $921 million to finance construction of a proposed coal-burning power plant in Clark County. Like a homeowner seeking a second mortgage, East Kentucky Power Cooperative needs approval from the USDA’s Rural Utilities Service, which is the utility’s biggest creditor, to accumulate the additional debt. East Kentucky Power Cooperative already has to repay more than $700 million it owes taxpayers for Rural Utilities Service loans it took out to build and operate other power plants.

The Rural Utilities Service approved the lien accommodation on East Kentucky Power Cooperative’s current debt last September. In Alaska, ratepayers may face a similar situation regarding Golden Valley Electric Association’s plans to restart the Healy Coal Plant Unit #2. The Healy Unit #2 plant already has cost ratepayers millions of dollars, and if Rural Utilities Service has the precedent of accommodating to heavily in-debted energy authorities to fund shaky endeavors, then ratepayers will find themselves footing the bill.

“It is hard to believe that the USDA has not learned from the current global financial meltdown that unlimited debt is poor policy,” says Nancy Kuhn, spokesperson for Golden Valley Electric Association’s Ratepayers Alliance. “I encourage the USDA to move away from the laager mentality of unlimited debt for utilities. The GVEA co-op members expect fiscally prudent decisions.”

East Kentucky Power Cooperative documents show that it is dire financial condition. It has a debt-to-equity ratio far below other electric cooperatives, already has more than $2 billion in debt, and its own analysts say it is doubtful the cooperative could even reach an investment-grade credit rating.

In 2008, Rural Utilities Service declared it would not guarantee loans for any new coal-fired power plants but it has now made exceptions in East Kentucky Power Cooperative, and who’s to say where it will stop? Such inconsistencies are disconcerting to co-op members.

Golden Valley Electric Association itself has secured loans from Rural Utilities Service in the past for over $65 million. Will it look for future loans for the Healy Unit #2 restart? Though the plant was built well before 2008, we all know it has been shut-down for the last decade and has been a black hole of public money. Golden Valley Electric Association and the Alaska Industry Development and Energy Authority have never come clean on the true start-up costs for Healy Unit #2. Alaskan ratepayers already pay some of the highest electricity costs in the nation and fear taking on projects where the debt is unclear from the start can spike their rates.

“It is past time to get beyond the conventional coal of yesterday,” Kuhn said, “USDA should not use federal tax dollars to subsidize antiquated coal fired power plants.” Kuhn notes the benefits associated with conventional energy are becoming more uncertain as future federal legislation and regulations are expected.

Any debt the electric associations take on can fall on the backs of its ratepayers. In order to watch their backs, Alaskan ratepayer alliances banned together with co-ops across the nation to question Rural Utilities Service’s due diligence and internal procedures in deciding whether a utility is well positioned to take on additional debt.

Once ratepayers know what debt they are truly facing, they can have a voice in the process and may even work with the utility to choose a different path.

####

A copy of the petition letter to the U.S. Department of Agriculture’s Inspector General is available online: http://co-opconversations.org/UnitedStates/Alaska/