The Kentucky Public Service Commission on Friday approved the latest in a round of rate increases for East Kentucky Power Cooperative, which has sought the increases to reverse years of financial struggles.
The decision by the commission, which regulates utilities, will increase the cooperative's annual revenue by $43 million and be its third increase since 2007.
East Kentucky Power produces electricity for its 16 member co-ops, which also own it. In issuing its decision, the commission also approved rate increases for the member co-ops, which are more familiar to the more than half-million homes and businesses across 87 counties served by EKPC-produced power.
The new rates take effect immediately. They will increase the average residential customer's monthly bill by a range of $3.94 to $5.85, depending on the cooperative.
"This rate increase is necessary in order to continue improving EKPC's equity and strengthen its financial condition," Tony Campbell, president and CEO of East Kentucky Power, said in a statement.
The increase allowed was less than East Kentucky Power requested. The cooperative had requested a boost of $49.4 million, or 5.27 percent.
The commission said in a news release that its own analysis suggested an increase of $43.8 million could be justified, but the $43 million that was approved represents what had been agreed on between East Kentucky Power and all but one party to the case. Another component of that agreement is a stipulation that if the co-op's revenue tops a certain measure, it will refund the excess to customers.
As part of the settlement approved Friday, the co-op also agreed to accept and implement all recommendations made last year by an independent consultant that carried out a PSC-ordered management audit.
That audit was a scathing rebuke of the co-op, which was plagued with financial problems in prior years. The recommendations included East Kentucky Power's board emphasizing the financial health of the co-op and a move away from its focus on low rates "at the expense of all else." The audit also recommended implementing strategic plans to address issues including power supply, financial strength, rates and competitiveness.
In the months after the audit was released, the co-op backed away from a major expense, opting to permanently cancel plans for a coal-fired power plant in Clark County that had been strongly opposed by environmental groups.
The co-op had already spent $150 million on materials, including a generator, turbine and steel. The co-op is seeking to resell those items or use them as backup parts for its other generators.
Also as part of the settlement approved Friday, the co-op will file an application to the PSC to have its rates adjusted to recover other remaining expenses related to the proposed plant.