Bravo to the local grassroots group that persuaded Frankfort’s utility board to take a deeper look at power contracts that could saddle residents and businesses with needlessly high electricity costs for years.
The questions being raised resonate beyond Frankfort because 10 city-owned utilities, which last year formed the Kentucky Municipal Energy Agency, are part of the pact, yoking them to another decade of dependence on coal-fired power at a time when energy options and markets are rapidly changing.
Beyond that, the entire state can learn from EnvisionFranklinCounty’s example. The day is past when Kentucky’s every energy question had a single answer; now even a coal state must make smart choices, especially if we hope to preserve the competitive advantage of relatively low-cost power.
Concerned that the Frankfort Municipal Plant Board was moving ahead without critical information, the citizens group along with the Kentucky Conservation Foundation hired a consulting firm based in Cambridge, Mass., to review the KyMEA contract and three related agreements to purchase power, including one with Big Rivers Electric Corp. in Henderson.
Among other worrisome findings, the consultants concluded that the contract contains “implicit disincentives” that will deter local utilities from pursuing cost-saving conservation measures such as energy efficiency, demand-side management and distributed or decentralized wind and solar generation. Such conservation measures protect consumers from paying to build new generating capacity, which is very costly.
In Kentucky, Glasgow’s municipal utility is a role model for holding down costs through reshaping demand so that, as Glasgow Electric Plant Board CEO William J. Ray says, “only the most clean and efficient generation needs to be used to meet our daily demands.” If Glasgow, which is not part of KyMEA, can reap the benefits of innovation, so can other Kentucky communities.
Also, and this should be very concerning, no analysis of the purchase agreement with Big Rivers was possible because of extreme redactions by the power wholesaler. It’s routine for prices and other competitive information to be redacted from contracts when they are released to the public. But Big Rivers went much further, the consulting firm reports, “in depriving the public of key information, including: the amount of capacity being purchased, how prices are determined, part of the description of the term of the contract, whole sections the topic for which we can only guess, and even definitions.”
Municipal utilities are not subject to regulation by the Kentucky Public Service Commission, the rationale being that voters can hold them accountable for their rates and service at the ballot box. The opacity of the Big Rivers contract contrasts with PSC oversight requiring utilities to lay out their numbers for public scrutiny. “The experience of the citizens in Frankfort raises significant questions about accountability,” said Tom FitzGerald, director of the Kentucky Resources Council, who also says it may be time for the legislature to consider putting the KyMEA under PSC jurisdiction.
After hearing local concerns for a few months, a unanimous Frankfort Plant Board voted Nov. 15 to hire an independent energy consultant and legal counsel to review the KyMEA agreement. Taking a deeper look can only yield a better outcome.