by MATT HUGHES
J-E News Editor
The city of Providence, along with 9 of the 12 entities from around the Commonwealth that make up “KY Municipal Group”, filed paperwork on Monday stating that they would be seeking to terminate their contracts with Kentucky Utilities (KU) and would then seek to purchase power on the open market.
“In September 2013, Kentucky Utilities (KU) unilaterally proposed significant changes to the pricing and key contract terms and conditions under which KU would continue to provide wholesale power service to the 12 municipal electric systems,” said John Painter, CEO and Executive Consultant of nFront Consulting, which is representing the 12 utility customers. “Among the changes proposed by KU would be to increase the notice required to terminate the current service agreement - from 5 years to 10 years.”
The 12 member group includes the Cities of Bardstown, Bardwell, Berea, Falmouth, Madisonville, Nicholasville, Paris, and Providence, the Barbourville Utility Commission, the Benham Power Board, Corbin City Utilities Commission, and the Frankfort Plant Board.
As of press time, Nicholasville and Bardstown were still considering the issue.
“Last week, KU filed a motion at the Federal Energy Regulatory Commission (FERC) to delay the deadline for providing the notice from April 22 until June 11,” said Painter. “However, that motion has not yet been acted on by the FERC. These two municipals are planning to consider the decision further in light of that proposed delay. The others chose not to defer the decision.”
Providence banded with this group of electric customers many years ago because as a group they could purchase electricity at cheaper rate.
“KU cannot compete to keep their business because they cannot sell their power at market price,” Painter explained. “They do not have the authority to sell at anything other than cost.”
According to Painter, recently KU has had to spend a great deal of money on their system, which has increased their cost of doing business.
“In years past, KU was a low cost supplier,” he said. “However, in the last five years, KU’s wholesale power rates to the KY Municipal Group members have increased significantly. Unfortunately, considering KU’s new rate proposal and KU’s plans to make large investments in power production facilities, we anticipate that KU’s wholesale power rates will continue to increase very significantly during the next five years and in the years beyond.”
Tuesday, April 22, 2014 was the groups deadline for filing their termination notice, because on April 23 the groups contract with KU would have automatically renewed.
Any changes to Providence’s electric service could take up to five years to be completed, although Painter said that KU has expressed interest in fulfilling terminations earlier than the five year request.
“It could happen as soon as two or three years,” he said.
KU will retain ownership of of both electric substations in the city of Providence.