Journal-Times (Grayson, KY)

January 16, 2013

AG says Olive Hill electric rate increases violate state law

By Joe Lewis - Staff Writer

Jan. 16, 2013 — The Attorney General’s Office of Rate Intervention Monday released a preliminary report by Director Jennifer Black Hans that details numerous observations and recommendations in response to consumer complaints filed against Olive Hill Utilities.

Chief among the AG’s findings was the revelation that electric rate increases, which have been implemented numerous times since 2006 without public hearings, are a violation of state law.

“Regarding ordinance No. 2000-3, to the extent that the ordinance permits increases in rates charged for services to retail customers of Olive Hill Utilities without a public hearing, it violates KRS 96.534,” Hans says in her report.

The report also addresses the legal authority of the city clerk, assistant city clerk, and the head utility clerk to make changes to electric rates.

“None of the ordinances supplied authorize such a delegation of authority,” Hans states, continuing with the assertion that, “municipal employees and officers should not be making legislative decisions regarding rates of service.”

The letter also states that, in the absence of an appointed board, the authority for setting utility rates falls solely to the City Council.

The document also outlines irregularities within the utility budget, specifically in the area of employee salaries.

“We note that personnel expenses (“salaries and costs”) represent between 20 and 25 percent of the total operating costs […] which appear extraordinarily high,” Hans says.

The letter also observes that documents submitted by the city do not adequately justify profit amounts in the utility budget and do not indicate that rate increases have been directly related to a rise in wholesale costs.

“If there are rate increases that are not directly related to wholesale costs or other quantifiable adjustments for the city’s costs, and are not subject to hearing or oversight by the City Council is almost certain and perhaps presumed that the profits are unreasonable and/or unjust,” Hans says.

She indicated in the letter that her inquiry is ongoing and that her list of observations and recommendations only list the primary concerns of her office and do not necessarily reflect all the violations that may have occurred.

Mayor Kenny Fankell told the Journal-Times on Tuesday that he had seen the AG’s report but had not read it.

The period of time covered by the AG’s report was during the administration of former mayor Danny Sparks.

Joe Lewis can be reached at or by telephone at 286-4201.