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Fri April 18, 2014
Madisonville Looking at Options in Contract Dispute with KU
A Madisonville official says the city is weighing its options as the effective date of a disputed contract with electricity provider Kentucky Utilities nears. In September, KU notified the city of impending changes to the parties’ contract that would take effect April 23rd.
City electrical superintendent Jim Asbury says among the provisions is an opt-out clause that would require either party to give 10 years notice instead of 5 years before exiting the deal.
“So, we’re kind of faced with a deadline of the 23rd of this month to determine ‘OK, are we going to cancel the contract while we know we still have a five year window to terminate, or are we going to take a roll-the-dice chance and maybe wind up with a ten year notification?’ It’s too far in advance to try to get a power arrangement made,” Asbury said.
KU has also adjusted the contract’s return on equity. When the current 5 year contract period started in 2009, the rate stood at 11 percent. KU’s alterations have upped that to 11.7, while the city requested for 8.3 percent.
Asbury says a “true up” has been added to the terms as well.
“They’re going to be enforcing an annual true up, and what that really means is that, for example last year - if they didn’t meet the equity percentage that’s in the contract, then we would have to make up that difference,” Asbury said.
Asbury says he thinks KU will terminate the contract if significant concessions are made. Madisonville City Council has given Mayor David Jackson the authority to do the same, if necessary. The city's electricity will not see any outages or other service disruptions.