2008 Rate Case FAQ

When will we file for our rate increase?

We will officially file on or about March 31. The board of directors approved the proposed rate adjustment at a special meeting on March 26.

How much of an increase should we expect?

The average for all four districts, and all classes, is 9.1 percent, but it could vary by district and by rate class (residential, commercial, etc.).

Why are we filing for a rate increase?

• It’s been a long time since any of our districts have increased, and just as the prices of groceries and fuel have drastically increased in the past 15 to 25 years, so have our costs of doing business. The cost of coal, which supplies 90 percent of Kentucky’s electricity, has risen and will continue to rise because of a energy demand, rising coal shipping costs, the uncertainty in the Middle East and natural disasters in the U.S.

•  Global climate change concerns also will drive up the cost of generating electricity because of stringent federal regulations that will only become even stricter.

• Finally, we must have more revenue to meet the electric needs of our members.

When will the rate increase go into effect?

The entire process takes about six months. If we officially file in March, members would see the increase reflected on their bills in the fall, probably September or October.

When did Blue Grass Energy last have a rate increase?

• Nicholasville/Madison Districts – 1983

• Lawrenceburg District – 1986

• Cynthiana District -- 1993

Who determines whether Blue Grass Energy gets a rate increase?

Like all utilities in the state, BGEnergy is regulated by the Kentucky Public Service Commission, which will either accept or reject our request for a rate increase, based on the cooperative’s financial condition. We have avoided a rate increase for so long that we must have new revenue to continue to operate.

How do our rates compare to other electric utilities in the state?

Most other co-ops in the state have already implemented a rate increase or are in the process of requesting one. According to the most recent data, Blue Grass Energy falls about in the middle of 24

co-ops – half have rates higher than we, half have lower.

Why are our rates higher than KU?

KU has 35-40 customers per mile of line, while we have 8 or 9. A great deal of our service area is sparsely populated in very remote and rural areas. Cooperatives were founded because investor-owned utilities deemed it unprofitable to provide service to the rural areas. While some of BGEnergy’s service area has become populated, much of the area remains rural. Therefore, our costs will be more because we serve fewer customers in areas that are sometimes more difficult to reach.

Will a rate increase eliminate the fuel adjustment charge and the environmental surcharge?

No. The fuel adjustment charge helps to pay the ever-rising costs of fuel, while the environmental surcharge helps to pay for measures BGEnergy and East Kentucky Power Cooperative must take to comply with stringent Environmental Protection Agency regulations.

Is the rate increase for employee benefits and increased salaries?

The revenue from the rate increase will support everything we use to operate, which, at some point, does affect employee benefits and salaries. But the great majority of Blue Grass Energy’s revenue is used for two things:

• To pay interest on the loans we need to operate. BGEnergy and most electric cooperatives take loans from the Rural Utilities Service so that we don’t have to put the burden entirely on our members.

• The maintenance of our lines, poles, transformers, etc. – everything that keeps our members’ lights on. Poles and lines wear out just like anything else, and to ensure quality operation, they have to be replaced from time to time.

What has Blue Grass Energy done, and what will it continue to do, to contain costs?

Blue Grass Energy has cut costs to avoid a rate increase for as long as possible, and we will continue to maintain our costs by measures including:

• Negotiations with vendors to keep our costs steady while the price of materials increase.

• Partnerships with other co-ops to keep down the costs of materials, sponsorships and educational opportunities.

• Implementing new technologies and processes to do business more efficiently and cost effectively.

How can members help to control their energy costs?

On www.bgenergy.com, members can learn about services that make paying their bills more convenient, including AutoPay and Levelized Budget Billing, and Simple Savings energy-efficiency tips that will help save money and energy.