Underfunding of the Public Service Commission should be of much greater concern to Kentuckians than the agency’s recent reorganization.
As Rep. Chris Harris told Herald-Leader reporter John Cheves, the PSC has a vital role in protecting Kentuckians, not just from being overcharged by utilities but also by guaranteeing that our water, power and heat are there when we need them.
Effective public protection requires an expert staff capable of diving deep into technical and legal complexities and tangling with investor-owned utility companies. But the PSC, which had 120 staffers at the turn of this century, is down to 75 employees (expected to rebound to the low 80s next year).
Some of the lost staff can be attributed to changing conditions, such as more reliance on consultants, telecom deregulation, consolidation of state information technology and a legislative paring down of PSC oversight of water utilities.
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But the shrinking PSC is also the result of funding decisions.
Lawmakers and governors of both parties have gotten into the habit of raiding PSC funds which are provided by utility consumers. Every year, utilities regulated by the PSC pay an assessment based on their earnings to support the agency. The utilities are then allowed to pass that cost along to customers.
This year the fee on utilities will generate about $16.5 million but the legislature allowed the PSC to use only $9.4 million of that amount to pay staff, consultants and other expenses. The legislature swept the remaining $7 million into other areas of the state budget.
Since fiscal year 2006, utility customers have provided $153 million to support the PSC, but only $107.5 million actually went to support the agency. The remaining $45.5 million went elsewhere in the state budget.
Utility consumers and the PSC are far from alone in this regard. To balance the budget, governors and lawmakers vacuum up money from accounts and funds created for specific purposes and collected from such sources as professional and occupational licensing fees.
Buyers of nature license plates, who thought they were supporting more nature preserves, were rudely surprised to learn that part of what they paid had been swept into the budget for purposes having nothing to do with nature. Their protests earlier this year persuaded the legislature to specifically bar “sweeping” of the proceeds from nature plates in the current two-year budget. The budget still swept $2.5 million a year from other sources that fund the Kentucky Heritage Land Conservation Fund, which preserves and conserves natural areas that possess unique features such as habitat for endangered species or that are threatened with loss or alteration.
To get around the laws designating such funds for specific purposes, a clause is inserted in the state budget saying “notwithstanding” this law that says this money must be spent this way, we’re going to spend it this other way. The practice has been upheld by the state Supreme Court
The advantage to raiding these funds is that lawmakers and governors have avoided the much more politically difficult challenge of reworking Kentucky’s decrepit tax code into a broad-based system that is fair and meets the state’s revenue needs. A spiraling public pension crisis may finally force them to do the hard work of tax reform this year.
The PSC reorganization, which originated with the agency, appears to be making the best of its situation by realigning resources with needs.
If the PSC doesn’t need all the money that is being generated by the fee for its support, ratepayers should get a small break on their bills, but that won’t be possible until lawmakers tackle tax reform. Neither taxpayers nor ratepayers should be satisfied until they do.
This editorial was modified from its original version to include information about the legislature this year barring the “sweeping” of revenue from the sale of nature license plates.