Audit finds issues with EKPC's finances, governance

More encouraging news this week in our campaign to prevent construction of a coal-burning power plant in Central Kentucky and bring Kentucky’s rural electric cooperatives back to their democratic principles.

The Public Service Commission released an audit Thursday that found serious issues with East Kentucky Power Cooperative’s governance and financial condition. The audit makes it less likely that EKPC will be able to obtain private financing to build the Smith plant.

The PSC, a three-member board that regulates utilities, had asked for the audit in December 2008 after EKPC’s financial position had declined for several years. The audit looked at governance, strategic planning, interaction of EKPC’s management with its board, and the utility’s operations, including financial systems, business strategies and operating policies.

Among other findings, the independent auditor found that EKPC is threatened by a "real, continuing and hazardous conflictâ€ created by an overriding priority on keeping rates low at the expense of the utility’s financial condition. It also said EKPC has been too reliant on building, owning and operating electric generating facilities and has not sufficiently explored other options such as purchasing power from neighboring utilities.

The audit recommended that changes should ultimately be driven by co-op customers in EKPC’s 16 rural electric cooperatives, which have more than 500,000 customers in 87 counties in eastern and central Kentucky. This will be an important message for co-op members to carry with them as they engage with co-op directors and other members at the co-ops’ upcoming annual meetings. (Stay tuned to this blog and the next issue of balancing the scales for more information about the annual meetings.)

Click here to read the PSC’s press release about the audit. And here to read the full audit.

Last week, EKPC had asked the PSC to temporarily withdraw its application for approval of private financing for the Smith plant so that it might reassess its finances.

Here are links to news coverage of the management audit.

From The Lexington Herald-Leader

From the Public News Service

From The (Ashland) Independent

From CNBC

From The (Maysville) Ledger Independent