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Finances under review at EKPC

October 31, 2006|Mike Wynn

The state Public Service Commission has ordered an investigation into finances at East Kentucky Power Cooperative in response to annual reports that show the energy provider has been in the red since the last quarter of 2004.

The service commission filed the order on Friday for documents and financial statements dating back to 2001 to determine whether the cooperative can fulfill its financial requirements with lenders.

"We remain in good standing with our lenders," said Kevin Osbourn, a spokesman for the cooperative. "All loan funds are fully available for East Kentucky Power's use, so we think that's a vote of confidence in the future."

Osbourn said the cooperative's lenders are also aware of the reasons for negative net margins. Lenders include the Rural Utilities Service, the Federal Financing Bank and Cooperative Finance Cooperation, according to the commission order.

"We have been very diligent in the last year and a half to contain and reduce costs where ever we can. We are very sensitive to the impact of costs ... to our members and their members," he said.

According to East Kentucky Power, several circumstances have driven up expenses or decreased revenues since 2004, causing the margins to fall.

In 2004, East Kentucky Power recorded a negative net margin of $27 million after an extended outage at a plant in Maysville forced the cooperative to purchase energy.

Cooperative officials have additionally reported a $46 million negative margin in 2005 in response to a lawsuit from the Environmental Protection Agency. Officials say East Kentucky Power continues to dispute the suit but recorded the liability in accordance with required accounting standards to reflect any potential impact on finances.

The EPA has alleged that units at the cooperative's Dale Station in Clark County violate deterioration and acid rain provisions in the Clean Air Act.

East Kentucky Power officials also have cited mild weather conditions, which reduce demand for energy, to explain a negative net margin in 2006.

Osbourn said the order will not affect current projects, including the proposed new generating unit at J.K. Smith Station in Trapp.

"The bottom line is, we are confident we are going to work through all these issues. We think our future is going to be strong," he said.

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