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Kenergy prepares to file for rate increase

HENDERSON, Ky. — On Friday, Oct. 30, Kenergy plans to file a request with the Kentucky Public Service Commission (PSC) for a 2.46 percent rate increase.

This is the first rate increase the electric distribution cooperative has sought since 2011. At that time, the PSC approved a 2.87 percent increase.

If the PSC approves Kenergy’s proposal, the cooperative expects its new rate to take effect by May 1, 2016.

If approved, the proposed rate would increase the average residential bill by $3.90 a month. Kenergy’s average residential use is 1,352 kilowatt hours.

“The decision to raise rates is always a difficult one,” said Kenergy’s President and CEO Jeff Hohn. “But the utility business is very capital intensive, and expenses continue to climb. We hope our member-owners understand rate increases are sometimes needed to protect the financial health of their electric cooperative.”

Hohn said the main driver for the proposed increase is depreciation expense, which has gone up nearly $3 million a year since 2011. Kenergy has invested about $60 million in infrastructure — about 40 percent of that amount was used to extend service to new members — during the past five years. That $60 million is not included in the cooperative’s current rates. Depreciation allows the co-op to recover that investment over a 30-year period.

In addition, labor costs and other overheads have increased 8 percent during the same time period, largely due to inflation, Hohn said.

Kenergy has taken these measures to cut costs since the last rate increase in 2011:

  • Refinanced loans to lower interest rates, which resulted in saving about $1 million annually.
  • Asked employees to pay a larger percentage of their health-care premiums, saving the cooperative $80,000 a year.
  • Saved about $118,000 annually — without sacrificing reliability — trimming trees and limbs near power lines.
  • Replaced about 100 miles of deteriorated power lines. Besides improving Kenergy’s service reliability, this upgrade has reduced line loss, which saves, on average, $100 per mile of line per year.
  • Reduced the size of the co-op’s vehicle fleet. Between 2011 and 2014, fleet maintenance costs declined 1.2 percent and expenses for 2015 are on track to achieve another decrease of about 0.5 percent. Two more vehicles are scheduled to be cut in 2016.
  • Changed the way it provides fire-retardant uniforms and other life-saving clothing to line techs and servicemen. Clothing expenses declined 41.5 percent between 2011 and 2014.

In addition to cutting costs, the cooperative generated new revenue since the last rate increase by leasing cell tower space to large telecommunications companies, increasing Kenergy’s income by $55,000 annually.

Kenergy is a not-for-profit electric distribution cooperative that is owned by those it serves. As a not-for-profit business, Kenergy returned about $10 million to its members since the last rate increase. That money was returned to past and present members in the form of capital credit retirements.

Kenergy serves more than 56,000 meters in all or parts of 14 western Kentucky counties.

For information on no- to low-cost ways to save money on electric bills, please read Sidebar to rate-case press release.

To read a full-page advertisement that will run in all the newspapers in Kenergy’s service area during the next three weeks (through mid-November), go to Kenergy rate-case ad.

As a member-owned utility, Kenergy is regulated by the Kentucky Public Service Commission (PSC).  To view a documents filed in the cooperative’s case, go to Kenergy’s rate-case filing at the PSC.