Bill to become Law
Ernie Fletcher signed a bill April 3 allowing electric cooperatives
in Kentucky to continue offering services in addition to electricity.
With the signature, the bill will become law this July.
Final approval of House Bill 568 marks the end of four intense months
for electric co-ops in Kentucky, after a far-reaching ruling in
November by the state Supreme Court. That decision said that state
law did not permit electric co-ops to offer any service other than
That high-court ruling would have affected several thousand Kentuckians
who receive services from electric co-op subsidiary businesses,
such as propane gas and high-speed broadband Internet connections.
The change in the law will allow such businesses to continue, but
under rules that strengthen the separation between the co-op electric
utility businesses and their non-electric subsidiaries. The stronger
rules were added to the original bill as a result of some business
people who were concerned that the co-ops would use the electric
utility business to subsidize the nonelectric ventures.
The story of the new law began in 1998 after Jackson
Energy Cooperative based in McKee, set up a subsidiary to offer
propane gas services to its members. An area propane gas dealer,
backed by the Kentucky Propane Gas Association, sued Jackson Energy
The suit charged that state law restricted electric co-ops from
providing any service other than electricity. The trial court and
the Kentucky Court of Appeals ruled that Jackson Energy Co-op could
legally sell propane, but the Supreme Court reversed those decisions.
So Rep. Rob Wilkey of Scottsville introduced HB 568. That bill specified
that the primary purpose of electric cooperatives in Kentucky is
to provide electricity, and that they can also have a secondary
purpose of engaging in any other legal activity through an affiliate
subject to statutory requirements.
The most extensive public discussion of the legislation first came
in a March 9 hearing before the House Tourism Development and Energy
Committee. Rep. Wilkey told the panel he introduced the bill to
clarify the law with regard to electric co-ops and their involvement
in nonelectric services.
Ron Sheets, president of the Kentucky Association of Electric Cooperatives,
called the bill an extremely critical piece of legislation
for electric co-ops. He said at the committee hearing that various
state and federal rules of protection are already in place. He said
the additional rules in the legislation create a firewall
between electric utility operations and affiliates providing nonelectric
services, effectively preventing the electric utility part of the
co-op from subsidizing the nonelectric subsidiaries.
That point was emphasized at the hearing by Hilda Legg, former head
of the federal Rural Utilities Service, an agency of the U.S. Department
of Agriculture which provides loans for many electric co-op operations
If co-ops were engaged in other (nonelectric) activities,
that had to be a separate accounting system, said Legg. Such
operations can not be financed by federal loans.
Co-ops make a difference in so many lives, said Legg.
They need to be involved in issues that members deem important
to their lives.
Dan Brewer, president and CEO of Blue
Grass Energy Cooperative based in Nicholasville, in his testimony
listed several nonelectric services provided by Kentucky electric
co-ops, including economic development, and billing services for
trash collection and water supply.
Brewer said without the change in the law, Cooperatives will
be forced to discontinue efforts at improving communities.
For additional background on HB 568, go to our magazine's Web site,
KentuckyLiving.com, and read Electric
Co-ops Support Bill to Allow Additional Services. For background
on the Supreme Court decision that led to introduction of the bill,
Court Ruling Restricts Co-op Services. For commentary on the
court ruling and legislation, read Legal
Limits, and The
truth about co-ops.
Kentucky Association of
Electric Cooperatives, Inc.
4515 Bishop Lane * Louisville, KY 40218
502-451-2430 * FAX: 502-459-3209