Regulators in Kentucky have given approval to Big Rivers Electric Corp. to sell its excess generating capacity to up to nine cities in the state. The Kentucky Public Service Commission on Dec. 12 issued an order approving a power sale contract that will allow the utility to provide wholesale electric power through the Kentucky Municipal Energy Agency, which represents the cities.
The PSC found the agreement, originally proposed by Big Rivers in a tariff filing in August, to be reasonable because it could help the utility cover part of its fixed operating costs that would otherwise be passed on to customers in its service territory. In 2013 and 2014, Big Rivers lost two large customers: a pair of aluminum smelters that at one time made up about two-thirds of its load and revenue, according to the PSC. The loss left Big Rivers with excess generating capacity and "necessitated rate increases in order to allow the utility to maintain financial stability," according to the commission.
Under the agreement, Big Rivers will designate part of its generating capacity specifically to meet the needs of the agency and its member cities — Barbourville, Bardwell, Benham, Corbin, Falmouth, Frankfort, Madisonville, Paris and Providence — from 2019 through 2029. Big Rivers will be paid for the reserved capacity and for the power used by member cities, the PSC said. The average aggregate demand for the cities in 2015 was 227 MW, with Frankfort and Madisonville representing 75% of that amount.
Since the departure of the two big aluminum smelters, Big Rivers has sought new customers and responded to multiple requests for proposals. "Although the contract terms involve a relatively minimal amount of Big Rivers' capacity over an intermediate period of time," the order said, "the revenues from the proposed agreement should generate margins that would defray fixed costs that would otherwise be shouldered by Big Rivers' native load customers."
Big Rivers must also comply with requirements set forth by the Rural Utilities Service, and the Kentucky Municipal Energy Agency must obtain "adequate participation" from its members, the PSC noted in the order. If those conditions are not met by Oct. 1, 2017, either party can terminate the contract.