PSC outlines plan to study response by utilities to Ike, ice storm

The head of the state Public Service Commission outlined for a House panel this morning his agency’s plans to take a broad look how the state’s electrical utilities dealt with two massive power outages the state has suffered in the last six months.

Executive Director Jeff Derouen told the House Natural Resources and Environment Committee that he expects the PSC to present its report by late summer that will include information about constructions standards for overhead power lines, the viability of a shift to underground lines, maintenance practices by utility companies and telecommunication infrastructure.

“We want to do this right,” Derouen told reporters after the presentation. “We want to look at all these areas in a way and not be predisposed to any answers until we get the evidence.”

A rough estimate gathered from utilities regulated by the PSC puts the cost of the storm at $250 million, or about five times the cost estimated for Hurricane Ike. That total does not include the cost incurred by municipal utilities such as Owensboro Municipal Utilities that don’t fall under the PSC’s jurisdiction.

That high cost means for-profit utilities and electrical co-ops will likely be approaching the PSC in the near future for rate increases to recoup those costs, though energy co-operatives such as Kenergy will have the ability to receive reimbursements of up to 85 percent of costs from the storm, according to PSC spokesman Andrew Melnykovych.

The presentation was made at the request of committee chairman Rep. Jim Gooch, a Providence Democrat, who said during the meeting that too often utilities approach the PSC for a rate increase that ends up being pared down and could leave them without the proper resources to prepare their systems for storms such as these.

Utilities apply to the PSC for rate increases, and the office of rate intervention in the state attorney general’s office also offers evidence of what level of rate increase it believes is warranted.

By contrast, the rates of a municipal utility such as Owensboro Municipal Utilities is only subject to the approval of the local government body.

“We have to understand that these companies, especially the co-ops have to have a rate where they can deliver their product and reinvest in their system so those systems withstand disasters,” Gooch said after the meeting.

In announcing today’s meeting, Gooch has said it was the first in a series of meeting to look at the state’s response to the ice storm, but said following the meeting that for now he does not have any additional meetings planned to look at the issue.

Read more about the meeting and the PSC’s planned report in Friday’s Messenger-Inquirer.


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