Say legislation could lead to higher utility costs
FRANKFORT, Ky. (March 4, 2013) – The Kentucky Chamber of Commerce, Kentucky Association of Manufacturers and the Kentucky Resources Council discussed their concerns about two bills that would give major users of electricity, primarily aluminum smelters, the ability to seek power on the open market.
During a media teleconference, several representatives from the groups aligned against House Bill 211 and Senate Bill 71 said that while the intent of the legislation may be laudable, the consequences for everyday consumers would be negative.
The bills were filed, in part, to help resolve a dispute between Big Rivers Electric Corp. and aluminum smelters in western Kentucky.
Kentucky Resources Council Director Tom FitzGerald said other customers could be required to shoulder the additional cost burden.
“The council remains convinced a legislative solution is not needed, and the governor should actively participate in discussions concerning the appropriate incentive package, including both traditional economic development tools and multi-county coal severance dollars, that could be applied to keep these companies competitive,” FitzGerald said. “In return for that assistance, we need to obtain a commitment to keep smelters in production and jobs in Kentucky.”
As drafted, the two bills could lead to an increase in utility costs for manufacturers, something most can’t afford in these economic times, noted the Kentucky Association of Manufacturers (KAM).
“In order to provide the power needed by all our manufacturers, utilities have had to incur major infrastructure costs and those costs are shared by all their customers,” said Greg Higdon, president and CEO of KAM. “When we think about allowing a large user to go outside of that structure to purchase power, the additional costs of power system maintenance must be absorbed by other users in the area.”
The Kentucky Chamber cited the impact these measures could have on Kentucky’s global competitiveness. During the teleconference, Chamber President and CEO Dave Adkisson said international bond markets could take note of any attempt by the Kentucky General Assembly to intervene in the contractual affairs between a utility and its costumers, resulting in difficulties for utilities to borrow money to improve the infrastructure and services provided to their customers.
“The chamber feels these two measures compromise the stability that ratepayers statewide have enjoyed,” Adkisson said. “These rates have long been an economic development recruiting tool for new and expanding business in the state. With continued pressures on our utility industry for the cost of compliance with EPA mandates, the last thing our utility rate base needs is another unnecessary increase due to government policies creating regulatory uncertainty.”
The three organizations are urging the executive branch, non-partisan Public Service Commission and the two parties involved to reach a balanced approach outside the legislative process. That approach includes safeguards for the remainder of the rate base, without disrupting the entire utility regulatory system in Kentucky by implementing legislation that is untried and uncertain.
Advocates of the legislation say they want to keep aluminum smelters in Kentucky, and the 2,000 jobs associated with them. Rep. Ben Waide has said the passage of the proposals would not result in higher electricity bills.
Neither of the bills has been sent to the floor for a vote.
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