Kentucky Regulators Raise Concerns About Electric Co-op’s Employee Benefits

Feb 7, 2017

Credit Facebook

The Kentucky Public Service Commission has granted a Southeast Kentucky electric cooperative a small rate increase, but in doing so, ripped the utility for excessive employee pay and nepotism.

Cumberland Valley Electric had proposed a rate increase that — like the recent proposal by Louisville Gas and Electric — would significantly raise the monthly service charge. In this case, Cumberland Valley wanted to raise the charge from $8.73 to $14.10.

In its order, the PSC granted Cumberland Valley part of that increase, raising the monthly charge to $12. But the commissioners said they wanted to see significant changes in the way the utility hires and compensates employees.

Co-op salaried employees received an across-the-board 3.5 percent pay increase, as well as receiving both a defined benefit pension plan and company contributions into 401k plans. Cumberland Valley also pays all health insurance premiums for employees and their families, and the company sought to recoup portions of these generous benefits from ratepayers.

Besides its generous employee salaries and benefits, the PSC raised concerns about the fact that a lot of the Cumberland Valley employees enjoying these perks are related. Four current employees are related to the utility’s CEO, and another 12 employees and a board member are related to other employees. These are violations of Cumberland Valley’s nepotism policy, which was frequently circumvented.

In its order, the PSC determined the exceptions to the company’s nepotism policy should end, and asked for the company to provide proof of that within 30 days. The commissioners also directed the utility to conduct a financial study examining how Cumberland Valley can cut expenses and explore the possibility of merger with another utility.

Cumberland Valley’s troubled financial condition is a result of the coal industry’s decline, the PSC noted in a news release. The utility has half as many large commercial and industrial customers as it did in 2011, which has resulted in a loss of revenue.

Cumberland Valley Electric serves about 23,600 customers in Bell, Clay, Harlan, Knox, Laurel, Leslie, Letcher, McCreary, and Whitley counties in southeast Kentucky. A spokesman for the company didn’t return a request for comment Tuesday afternoon.