Traverse City Record-Eagle

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April 15, 2014

Another View: Tough situation over electrical services

While virtually all cities in northeastern Kentucky provide their residents with some utility services —water and sewer, mainly, and sometimes natural gas — to the best of our knowledge, Olive Hill is the only town in the FIVCO region with its own electrical company.

Olive Hill purchases power wholesale from Kentucky Power and resells it to its residents over a municipally owned and maintained transmission system. It’s an arrangement that has traditionally worked well and has been a dependable source of income for the western Carter County town.

But now, Olive Hill finds itself facing a class action lawsuit stemming from its sale of electricity, one that could ultimately have dire financial consequences for the already cash-strapped city.

Carter Circuit Judge Rebecca Phillips recently issued an order merging a pair of suits alleging the city overcharged its residents for electricity into a single action. According to the order, the number of plaintiffs in the class could eventually number more than 4,500.

The lawsuits came about in the wake of a January 2013 report issued by the Kentucky Attorney General’s Office’s Office of Rate Intervention. In that report, ORI Director Jennifer Black Hans concluded Olive Hill’s electric rate ordinance, which was adopted in 2000, violated a state law requiring city-owned utilities to hold public hearings before increasing electricity rates.

The suits allege that, among other violations, the city defrauded its electrical customers and violated the Consumer Protection Act by not following established state law in setting and adjusting its electricity rates, and that the city council sought to evade public hearings on proposed rate increases.

If the plaintiffs prevail in the suit, the city could be forced to issue refunds to its electrical customers for the amounts it allegedly overcharged them. How much those refunds could total is anyone’s guess, but we suspect the amount would be substantial, seeing as how the alleged overbilling occurred over a 13-year period.

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