FRANKFORT, Ky. (WSAZ) -- The Kentucky Public Service Commission (PSC) has approved a request by Grayson Rural Electric Cooperative Corp. (Grayson RECC) for a rate increase that will allow the utility to maintain its financial stability.
In the order issued Wednesday, the PSC authorized Grayson RECC to raise rates to generate an additional $1.93 million in annual revenue. The increase is about $130,000 less than the utility requested.
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 1 0.910 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) will initially 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.
The PSC noted that since early 2010, Grayson RECC has been aware that lower energy sales and rising costs were causing its financial position to deteriorate.
The agency also said for the last year and a half, Grayson RECC has been in technical default of its lending agreement with the Rural Utility Service (RUS), but waited until late last year to seek a rate adjustment.
“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.
The PSC said in its order that Grayson RECC should improve its financial condition before considering any further wage or salary increases.
Furthermore, Grayson RECC, when faced with financial problems, 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.
The order directs Grayson RECC “to be more proactive” in addressing financial issues in the future and to keep the PSC informed of “all communication with RUS” with respect to its financial situation so that the PSC can monitor the utility’s financial condition.
Grayson RECC serves approximately 15,400 customers in six counties in northeastern Kentucky.