TheTimesTribune.com, Corbin, KY

Local News

April 16, 2014

CCU to give notice to get out of KU contract

Action also gives General Manager authority to work on agreement

CORBIN — By Jeff Noble / Staff Writer

A wholesale power supply contract between Kentucky Utilities and 12 city-owned utility companies in the state — including Corbin City Utilities — has raised some wattage lately.

The contract will be revised on April 23. But CCU and the other 11 companies, known as the “Kentucky Municipals,” also want to look around for a better deal.

That’s why the board of the Corbin City Utilities Commission voted unanimously on Tuesday to authorize a letter of termination to KU, as well as to give General Manager Ron Herd the authority to work with the other Kentucky Municipals, in attempts to reach an agreement beneficial to the city utilities.

Herd said after the meeting the action is a business decision, and will not be noticed by customers.

“Our consultant said they recommended we give notice to KU to end our contract, because we feel confident we can do better and be more in control. In 2013, Corbin City Utilities purchased 83,820 million kilowatt hours from KU. If we can save half a penny on what we buy, that can save us $419,000 a year,” he stated.

In previous years, the contract between KU and CCU has been a five-year agreement, which Herd referred to as an “Evergreen Contract.”

According to BusinessDictionary.com, an Evergreen Contract is an agreement between two parties that is automatically renewed (rolled over) after each completion or maturity period, until cancelled by the either party.

The KU contract with CCU will be revised April 23 and will go to a 10-year contract, unless the Federal Energy Regulatory Commission (FERC) rules differently on it.

Herd noted CCU would still have to go through negotiations with the contract.

“They’ve been great to us (KU), but they want to tie us down for 10 years. We knew where we were going with a five-year deal. My feeling is, from what our consultant recommends, there are options available out there within five years. …We have three other options for power sources. We will buy from somebody else. We could get a break on our rates, get a cheaper wholesale rate, get in with another group and buy our own generator, or go in with more utilities,” he pointed out.

Along with Corbin City Utilities, the 11 other city-owned utility companies called the “Kentucky Municipals” are in Barbourville, Bardstown, Bardwell, Berea, Benham, Falmouth, Madisonville, Nicholasville, Paris and Providence, along with the Frankfort Electric and Water Plant Board.  

“The ‘KU Municipals’ share the load, helping out each other. There is strength in numbers,” said Herd.

The Kentucky Municipals are partial wholesale requirements customers of KU.

KU currently provides the Kentucky Municipals with an offset to their bills in recognition of electricity generated by the Southeastern Power Administration.

In other actions taken at the session, The CUC’s 2013 Audit Report was presented by Nancy Logan of Marr, Miller and Myers, PSC.

“The audit went well, overall. Everything is in accordance with all the accounting standards we use, and we’ve applied those to the data. The internal controls are good, and in place,” Logan told board members, who unanimously voted to accept the audit.

In his General Manager’s Report, Herd mentioned a meeting is scheduled with GRW Engineers next Tuesday, April 22 at 10 a.m. at the CUC office. The meeting will determine how many flow meters would be needed, and where to place to analyze the wet weather flow that will be used in the design of the sanitary sewer main upgrade on Master Street.

The report also said the water line relocations on two state highway department bridge replacement projects on Ky. 6 and Ky. 3437 have been completed by the contractor, who has submitted the final pay request to the engineer. The state highway department will reimburse CUC for the costs.

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