March 4, 2013 - The Kentucky Chamber of Commerce, Kentucky Association of Manufacturers, and the Kentucky Resources Council held a media teleconference on Monday discussing their concerns with House Bill 211 and Senate Bill 71, bills that would give major users of electricity, primarily aluminum smelters, the ability to seek power on the open market.
Several representatives from the groups aligned against HB 211 and SB 71 stressed that while the intent of the legislation may be laudable, the consequences for everyday consumers would be negative.
Kentucky Resources Council Director Tom FitzGerald expressed his concern that other customers could be required to shoulder the additional cost burden.
“The Council remains convinced that a legislative solution is not needed, and that instead the governor should actively participate in discussions concerning the appropriate incentive package, including both traditional economic development tools and multi-county coal severance dollars, that could be applied to keep these companies competitive,” said FitzGerald. “In return for that assistance, we need to obtain a commitment to keep smelters in production and jobs in Kentucky.”
The Kentucky Association of Manufacturers noted the two bills as drafted could lead to an increase in utility costs for manufacturers, something that most can’t afford in these economic times.
“In order to provide the power needed by all of our manufacturers, utilities have had to incur major infrastructure costs and those costs are shared by all of their customers,” said Greg Higdon, president and CEO of the Kentucky Association of Manufacturers. “When we think about allowing a large user to go outside of that structure to purchase power, the additional costs of power system maintenance must be absorbed by other users in the area.”
The Kentucky Chamber cited the impact these measures could have on Kentucky’s global competitiveness. During the teleconference, Chamber President and CEO Dave Adkisson noted that international bond markets could take note of any attempt by the Kentucky General Assembly to intervene in the contractual affairs between a utility and its costumers, resulting in difficulties for utilities to borrow money to improve the infrastructure and services provided to their customers.
“The Chamber feels that these two measures compromise the stability that ratepayers statewide have enjoyed,” Adkisson said. “These rates have long been an economic development recruiting tool for new and expanding business in the state. With continued pressures on our utility industry for the cost of compliance with EPA mandates, the last thing our utility rate base needs is another unnecessary increase due to government policies creating regulatory uncertainty.”
The three organizations are urging the executive branch, non-partisan Public Service Commission and the two parties involved to reach a balanced approach outside of the legislative process. That approach includes safeguards for the remainder of the rate base, without disrupting the entire utility regulatory system in Kentucky by implementing legislation that is untried and uncertain.