Date: 11-01-2017
Revised rates would increase the average residential customer’s bill by $6.37 per mo.
Citing a “decline in its customer base,” as the reason for the need for more revenue, Big Sandy Rural Electric Cooperative Corporation filed an application with the Kentucky Public Service Commission this week to increase its rates.
The 327-page application includes copies of financial statements, supporting documentation, audits and testimony from three company officials who reported the rate increase is necessary to address the company’s “unsustainable financial condition.”
The company, one of 16 owner-members of East Kentucky Power serves 13,000 residential and commercial customers in Johnson, Floyd, Knott, Lawrence, Magoffin, Martin, Morgan and Breathitt counties. More than 70 percent of its customers are residential and most of them—more than 10,000 — reside in Johnson and Floyd counties.
If approved, the rate revision would increase the company’s revenue by nearly $928,000, or 4.1 percent, to “achieve a Times Interest Earned Ratio of 2.00x.”
Accounting and Finance Manager Billy O’Brian Frasure testified that, if approved, the revised rates would increase residential customer charges of $15 to $21.25, and the volumetric/demand rate of $0.08649 to $0.08705. He said the revised rates would increase the average residential customer’s bill by $6.37, or 5.5 percent.
He said the company served 13,177 customers in 2013 and that number decreased to 12,986 last year, which caused a sales revenue reduction of about $3.1 million.
He said “increased expenses and declining margins” have put the company’s “financial strength in jeopardy.”
President/CEO Bobby Sexton, a former coal mine inspector who stepped into the CEO role at the company in May, said the non-profit, member-owned rural electric cooperative, headquartered in Paintsville, adopted its current rates with approval from the PSC in 2012.
“Big Sandy’s customer base is primarily residential,” he said in his testimony. “Its customer base has seen a slow but steady decline since the 2012 rate case. This customer loss has naturally translated into similar reduction in year-over-year revenues.”
He said the cost of providing electric service has increase since 2012 and explained how the company refinanced $6.5 million in debt — with approval from the PSC this year — to save funds, and he and Frasure reported the company also saved money by reducing the number of employees by about four, requiring employees to pay more for health insurance and cutting back on other expenses.
“While certainly worthwhile and helpful, Big Sandy’s cost-cutting efforts in several places throughout the company have not kept pace with the financial dilemma caused by the dual problems of load loss and increased coast in other portions of the company’s operations,” he said. “The only way to bridge this gap and ensure the continued financial health and viability of Big Sandy is for its rates to be increased consistent with the request made in this case.”
According to the application, the company had more than $22.8 million in operating revenues in the 2016 fiscal year and fell about $1 million short of its revenue needs.
The company filed its first rate increase application in June, but withdrew it while announcing plans to resubmit, and the PSC dismissed that case. On Oct. 26, the company’s board of directors approved the current rate application filing.
The application is available online under case, 2017-00374 at psc.ky.gov.
Floyd County Chronicle and Times
