By Joe Lewis - Staff Writer
May 8, 2013 —
According to a letter sent from Mayor Kenny Fankell to City Council members last week, Olive Hill's utility operation is due a refund of about $170,000 from Kentucky Power – a subsidiary of American Electric Power (AEP).
AEP provides Olive Hill with an estimated cost of power for the year which may or may not reflect the actual cost to the city for purchasing electricity.
Each year, representatives from AEP meet with the public utilities operated by Olive Hill and Vanceburg to conduct a “true-up” – which is the difference between the estimated cost of power and what the companies actually paid during the previous year.
The true-up is typically in AEPs favor, with Olive Hill utilities regularly owing anywhere from $150,000 to $180,000 to make up for the shortfall between cost estimates and actual expenses incurred.
This year, however, both Olive Hill and Vanceburg's utility companies came out on the good end of the true-up.
In his letter to Council members, Fankell recommended placing the refund in an interest-bearing escrow account as a safeguard against unforeseen expenses that may arise in the upcoming year.
Fankell's suggestion mirrors the plan that Bill Tom Stone, the electric plant board superintendent for Vanceburg, suggested to his board members.
“We're looking at increases to the cost of electricity this year. AEP will be closing the Big Sandy plant in Louisa and purchasing a new, out-of-state plant. When things like this happen, those costs are always passed on to customers,” Stone said.
Stone stated that AEP has offered to foster the refunds for both utility companies in interest-bearing escrow accounts yielding a return of 3.25 percent annually.
Regardless of how the refund is allocated, appropriation of the money first must be approved by the Olive Hill City Council.
The Council next will meet in regular session on May 21 at the Olive Hill Senior Community Center.
Joe Lewis can be reached at email@example.com or by telephone at 286-4201.