FRANKFORT - The Kentucky Public Service Commission (PSC) approved a rate increase Friday for Big Rivers Electric Corp. to reflect the January loss of the Century Aluminum smelter in Sebree as a customer.
The PSC also approved pass-through rate increases for the three distribution cooperatives that purchase power from Big Rivers, including Jackson Purchase Energy Cooperative.
The rates for Big Rivers customers will increase, although not by as much as the utility requested. According to the PSC, customers will not feel the effect of the rate increase until next year.
The PSC agreed to let Big Rivers use reserve funds to offset the increases for as long as possible. Once the reserve funds are exhausted, residential customers will see monthly bills increase by about $15 on average. The actual size of any increase will vary depending on which of three distribution cooperatives serves that customer and on individual usage patterns, the PSC said.
In the order issued Friday, the PSC authorized Big Rivers to receive an additional $36.16 million â “ or 14 percent - annually from the remaining customers. That is about half the amount sought by Big Rivers.
An audit to review Big Rivers' plans for mitigating the combined effects of the loss of the Sebree smelter and the loss last year of Century Aluminum's smelter in Hawesville was ordered. It will be paid by the utility.
Big Rivers is owned by the distribution cooperatives. Together, the three cooperatives serve about 112,000 customers in 26 counties. The customers include about 20 large industrial facilities.
Big Rivers had applied to increase annual revenue by $70.4 million. As allowed under Kentucky law, Big Rivers and the three distribution cooperatives put their proposed rates into effect on Feb. 1 and began billing at the higher rates. Big Rivers offset the increase using reserve funds, so customers saw no change in rates, according to the PSC.
The PSC order directs Big Rivers to replenish the reserve funds to reflect the difference between the proposed rates and the rates approved by the PSC, which were ordered retroactive to Feb. 1.
Century Aluminum's Sebree smelter stopped purchasing power from Big Rivers on Jan. 31, the effective date of a contract allowing it to buy power on the open market. The contract was approved by the PSC on Jan. 30. The Hawesville smelter stopped buying power from Big Rivers on Aug. 20, 2013, and began buying it on the open market also under a contract approved by the PSC.
The PSC in October 2013 approved a rate increase that reflected the loss of the revenue from the Hawesville smelter. That rate increase was not offset by reserve funds.
The reserve funds were established in 2009 as part of a complex transaction under which Big Rivers regained control of its generating facilities, which had been leased to a third party when Big Rivers went through a bankruptcy proceeding in the mid-1990s. The funds were established for the purpose of mitigating fuel and environmental cost increases.