Big Rivers Electric embroiled in big rate argument in Kentucky

A newly-formed group of major industrial power customers for the coal-fired Big Rivers Electric in western Kentucky is urging other ratepayers to protest planned major rate increases by the generation and transmission cooperative and its members.

“If you are a residential or business customer of Kenergy Corp., Jackson Purchase Energy Corporation, or Meade County Rural Electric Co-Op, massive rate increases loom on the horizon,” said the website of the group, called Fair Rates Kentucky. “Big Rivers Electric Corp., which sells power to these power distribution co-operatives, is requesting a series of rate increases that will dramatically increase the rates that your co-operative must then pass on to you.”

The website noted the “very public negotiations” lately between Big Rivers and its large aluminum smelter customers in western Kentucky. “While we are all very happy that the outcome of these negotiations will keep important jobs in our community, we must now address the rate increases facing other customers served by Big Rivers,” the website added. “Big Rivers is losing 70% of its consumer base and wants to pass the cost of their now unnecessary power plants and power generation to you through a series of rate increases. The first rate increase would kick in as early as August 20, 2013, with the next and even larger increase coming early next year. “

The group said that Big Rivers wants to keep operating most of the same power generation capacity whether there is demand for it or not. Big Rivers gets the majority of its power from coal-fired plants, including Coleman and Green, that get most of their coal from western Kentucky coal mines.

The founding members of Fair Rates Kentucky are Aleris, Domtar and Kimberly-Clark.

Their website added about a pending rate hike request at the Kentucky Public Service Commission: “Of the $74.5 million total they are requesting in their rate increase, Big Rivers proposed that one company, Alcan, pay $25.5 million. Because of the proposal to raise its rate, Alcan gave its one year notice to leave the system effective January 31, 2014. This will trigger a second rate increase which will seek to recover the $25.5 million they were slated to pay, plus the amount of margin (profit) embedded into their current rate.”

Big Rivers owns and operates 1,444 MW of generating capacity in four stations: Reid (130 MW), Coleman (443 MW), Green (454 MW), and Wilson (417 MW). Total power capacity is 1,824 MW, including rights to the coal-fired Henderson Municipal Power and Light Station Two and contracted capacity from the Southeastern Power Administration. Big Rivers had indicated in March 1 fuel cost testimony filed at the PSC that it was holding off on making certain coal contract commitments beyond 2013 due to uncertainty about the status of its aluminum smelter customers.

Big Rivers works on deal with Century Aluminum

Century Aluminurn of Kentucky, a wholly owned subsidiary of Century Aluminum Co. (NASDAQ: CENX), Kenergy and Big Rivers Electric had announced on April 29 that they have reached a tentative agreement on the framework for providing market priced power to the Hawesville smelter. Under the arrangement, the cooperatives would purchase power on the open market and pass it through to Century at the market price plus additional costs incurred by them. The arrangement is intended to have no impact on the current rate proposal of Big Rivers or the related flow-through rate proposal of Kenergy, each currently pending before the Kentucky PSC. The framework is subject to the negotiation of definitive agreements and approvals from various third parties, including the boards of directors of all parties, the Kentukcy PSC, the Rural Utilities Service and others. The parties said they intend to move as expeditiously as possible to finalize the agreement in advance of the expiration of the current power contract on Aug. 20, 2013.

Within the ongoing rate case, the Kentucky Industrial Utility Customers (KIUC) group on May 3 asked the commission to require discovery from Big Rivers on just what the Century deal means. Said KIUC: “Obviously, these are very significant events that raise several questions regarding the rates proposed by Big Rivers in this case. For example, is Big Rivers receiving any consideration through the agreement with Century that should offset the requested rate increase? Are Big Rivers and its non-smelter ratepayers being appropriately compensated for any costs incurred by Big Rivers in facilitating market access?”

In a response filed May 7, Big Rivers said the KIUC request was premature, since the Century deal is only tentative. “If and when agreements are reached, the definitive documents must and will be filed with the Commission for required regulatory approvals,” Big Rivers added. “And if such a filing is made, it will include a full and complete explanation of the transactions represented by the agreements, and the anticipated impact of the terms of the agreements on Big Rivers and Kenergy. Until that time, there are no agreements about which Big Rivers can answer questions.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.