PSC approves rate increase for Grayson RECC

By Ryan Ottney

August 1, 2013

Ryan Scott Ottney

PDT Staff Writer

In an order issued Wednesday, the Kentucky Public Service Commission (PSC) authorized Grayson Rural Electric Cooperative Corp. (Grayson RECC) to raise rates to generate additional annual revenue of $1.93 million to maintain its financial stability. The allowed increase is about $130,000 less than the amount requested by the utility.

The monthly service charge for residential and farm customers will increase to $15, which is $4.65 more than the current charge of $10.35 per month. The cost of electricity will rise from 10.427 cents per kilowatt-hour to 10.910 cents per kilowatt-hour. For a customer using 1,000 kilowatt-hours per month (a kilowatt-hour is the amount of electricity used by a 100-watt light bulb in 10 hours), the total monthly bill (excluding surcharges) initially will increase by $9.48, to $124.10. That is about 8.3 percent higher than the current monthly bill of $114.62.

Although agreeing that a rate increase is necessary, the PSC noted several issues with respect to Grayson RECC’s financial management. The timing of the rate increase request itself was problematic, the PSC said in its order. Grayson RECC has been aware since early 2010 that lower energy sales and rising costs were causing its financial position to deteriorate, the PSC noted.

“The Commission is concerned that Grayson did not address this situation with more urgency,” and instead risked its financial condition and ability to provide adequate service by failing to act in a timely manner, the PSC said. The PSC also noted that Grayson RECC’s wage and salary expenses continued to rise even as its finances deteriorated after the 2008 economic downturn. Other electric cooperatives facing similar problems either eliminated or reduced wage and salary increases, the PSC said.

Furthermore, when faced with financial problems, Grayson RECC chose to reduce spending on operations rather than reduce the fees and expenses it paid to its board of directors, the PSC said. Those fees and expenses are higher than those paid by similar cooperatives, the PSC noted.

“The Commission is of the opinion that Grayson should evaluate its priorities when making decisions to reduce discretionary spending in order to minimize the potential for both negative financial impacts and negative operational impacts,” the PSC said in its order.

In addition to granting the rate increase, the PSC also allowed Grayson RECC to establish a voluntary prepaid metering program similar to that offered by several other electric cooperatives in Kentucky. The program allows customers to pay in advance for service and to replenish the account as needed. Prepaid service customers will pay a $10 monthly program administrative fee in addition to the monthly customer charge and cost of electricity, but are not required to pay a deposit and do not incur fees for late payments or reconnection if service is discontinued.

The PSC conducted an evidentiary hearing in the case on June 18, 2013. There were no intervenors in the case. The PSC order and documents filed in the case are available on the PSC website, psc.ky.gov. The case number is 2012-00426.

Ryan Scott Ottney can be reached at 740-353-3101, ext. 287, or rottney@civitasmedia.com. For breaking news, follow Ryan on Twitter @PDTwriter.