Paducah Power Customers See Higher Bills with Cold Weather, Limited Supply

Mar 28, 2014

Credit Security Net (securitynet.org)

Paducah Power System customers are facing a financial double whammy of cold temperatures and a limited power supply that’s costing them upwards of an extra $100 for one month.

PPS is one of many shareholders of power supplier Prairie State Energy in Illinois, which couldn’t meet customers demand during the arctic winter. To meet that demand PPS had to purchase more power on the open market which is considerably more expensive.

Customers receive a Power Cost Adjustment to pay for that additional power, which cost four times more last month from previous months.  City manager Jeff Pederson sits on the PPS board and hopes the rise and fall of bills will stabilize.

“Prairie State is a long term investment, its big business, its volatile business,” he said. “That surcharge (the PCA) is associated with the fact that the production plant not yet operating in peak efficiency. It is still in what we call a shakedown phase.”

The PPS board will assess the PCA again next month to decide if it will change. Pederson, says PPS believes the rates in the future will be comparable to TVA because a 30-year coal supply is located at the Prairie State plant.

In September 2013, The Chicago Tribune reported that some 2.5 million customers are seeing higher bills in Illinois, Indiana, Michigan, Missouri, Ohio, Virginia and West Virginia where power companies have bought shares in Prairie State.

Paducah Power Systems is a partner with Princeton Electric in the Kentucky Municipal Power Agency, which owns 7.82 percent of Prairie State plant. KMPA receives 124 megawatts, and PPS gets 120 megawatts of that.

Princeton is also seeing higher electric bills. The cost of building the plant went over budget by $1 billion totaling $4.9 billion for construction and has had operational issues rendering units offline at times. Moody’s Investor Service lowered PPS’s bond rating from A2 to A3 in March 2013 due to the $162.1 million in outstanding electric revenue bonds.

Paducah Power System Director of Community Relations Andrea Underwood says Paducah Power has plenty of capacity for their 22,500 customers but continues to have to pay for the power from Prairie State because of their investment in the plant, even while buying power from the market. The goal was to protect PPS from future rate hikes and over time have stable and reasonably priced power, she said.

“Our base rates were created using the figure of $72 per megawatt of wholesale power,” Underwood wrote in an email. “The PCA is calculated to collect wholesale power costs above $72 per megawatt of wholesale power. The shakedown phase of the generating units has gone longer than expected and not as well as expected, making our wholesale power costs much high than expected, precipitating the increase.”

McCracken County resident Ronald Ward raised concerns of the higher power costs March 11 during a recent City Commission meeting. He said PPS has the highest rates in the state displaying figures of PPS customer using 2,000 kilowatts will have a bill of $367.13 for a month.

City Commissioner Sandra Wilson questioned his numbers due to concerns about his calculations during the meeting. She said businesses are recruited on the basis that PPS rates are low.

Currently, PPS residential customers pay .11153 cents per kilowatt-hour as a base rate and a PCA of .0359 cents per kwh as of April 1. Princeton Electric current rate is .12034 per kwh up from .08141 cents per kwh in January 2010. In contrast, according to Jackson Purchase Energy Corp. website currently customers rates are .114365 cents per kwh and Kentucky Utility is .0899 cents per kwh on LGE-KU website. No cost adjustments were noted on those sites.

PPS will raise the base rate by 5 percent in April. Underwood said, the PCA will be determined at the next board meeting but is not anticipating it to go up.