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Restructuring Myths And Promises

  Following are excerpts of testimony by Ron Sheets, president of the Kentucky Association of Electric Cooperatives, on September 27 in Frankfort before the Kentucky Special Task Force on Electricity Restructuring:

  There are many misconceptions related to electric utility restructuring. Here are a few we believe could be answered during the next couple of years through a broad public information program:

  There will be large rate decreases for all customers with restructuring in Kentucky. This is wrong. As a very low-cost state, the possibility of significant rate reductions is far less than in high-cost states. And rates could go up for some users.

  If legislation is enacted, all classes of customers will have a choice in determining their electric supplier. This is wrong.
Experience has shown that those customers likely to contribute toward a profit for the utility are likely to have choice. Choice for others is questionable or nonexistent. But remember, utilities also have the choice to serve or not serve the customer in most cases.

  Rate reductions will apply to the entire electric bill. This is wrong. The reductions, if they are available, will only apply to an average of about 70 percent of the bill since this is the portion representing the cost of wholesale power, which would be the portion of the bill subject to customer choice.

  My local electric utility will change. The local retail service provider of electricity is not likely to change at all. The change will occur simply in the source of the generated power. 

  Another misconception: Rate decreases, when they are available, are the result of greater efficiencies in electric utilities. Instead, public bond offerings, general fund appropriations, and other measures are often used. Rate reductions mandated by law are often followed by “smoke and mirrors” revenue generation.

  There will be no cost involved in leaving the current supplier and no cost in joining the new supplier. This may or may not be true.

There will be no new costs associated with industry restructuring. This is probably not true. In all likelihood, many customers will have to have new metering. In fact, some alternate suppliers are requiring this. A lot of the current metering technology simply can’t handle a real-time measurement.

  There’s one issue of paramount importance to electric cooperatives in Kentucky. We believe that promises, direct or implied, made to our customers should be kept. But in other states promises were not kept. People were told they would get lower rates, but they didn’t get lower rates. They were told they would get choice, but they didn’t get choice. 

  We are a family of 27 cooperatives with roots that go down for about 60 years in our state. When we came into existence in the late 1930s, about one farm in 10 had electric service. Today, Kentucky sells more electricity over co-op lines than any other state in the nation. We aren’t scared-our rates are too competitive for us to be afraid about our continued existence. I will simply tell you with every ounce of conviction that I can convey that we want to do the right thing for the members who own us. We have no other motive and no other mission. 

  We strongly urge you to support additional study of this very complex industry. In turn, we promise you our involvement with the balance of this study process. We hope to work with everyone in the right way for the right reasons. And we really hope to have another two years to do so.

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