Audit ordered for electric cooperative in northeast Ky.

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FRANKFORT, Ky. (KT) – The Kentucky Public Service Commission has chosen a consulting firm to perform a management audit of Grayson Rural Electric Cooperative to determine if it should be merged with another utility.

Vantage Energy Consulting LLC, based in Florida, will conduct the review of the troubled coop. The PSC ordered the management audit after a rate case proceeding uncovered problems with Grayson RECC’s operations and finances.

In a March 28 order opening the audit, the PSC said Grayson RECC’s top leadership had effectively ignored a 2013 directive, issued in a prior rate case, to improve its finances and operations.

That inaction by Grayson RECC, and other issues which emerged during the current rate case, are “evidence of gross mismanagement” that has placed a financial burden on the utility’s ratepayers, the PSC said.

Citing a lengthy list of questionable management practices, the PSC said it is unclear whether Grayson RECC’s leadership was unaware of the practices or doesn’t have sufficient understanding of proper management practices to be able to recognize the problems and take corrective action.

An audit is needed to examine all aspects of Grayson RECC’s management, including long-term planning, the role of the board of directors, financial management and personnel functions, the PSC said in its March order. The audit also will examine “the necessity and feasibility of Grayson RECC merging with another electric utility.”

As provided for in state law, the PSC selected the independent consultant. Grayson RECC will pay for the audit, which will cost no more than $124,060.

Vantage Energy will begin work this month gathering information from Grayson RECC and others. The review, formally known as a focused management audit, is scheduled for completion in early 2020, when Vantage Energy will issue a report of its findings and recommendations.

Findings will serve as the basis for a corrective action plan that will be agreed upon by the PSC and Grayson RECC. Grayson RECC will be expected to implement the action plan under monitoring by the PSC.

Grayson RECC serves about 14,150 customers in Carter, Elliott, Greenup, Lawrence, Lewis and Rowan counties in northeastern Kentucky. It is one of 16 electric distribution cooperatives that purchase power from and jointly own the East Kentucky Power Cooperative.

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