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December 7, 2017

Satterwhite takes the stand to explain rate increase of $40 million starting in January

Kentucky Power President Matt Satterwhite testifies before the Kentucky Public Service Commission on Wednesday during the first day of the PSC’s hearing on the company’s rate review request.   Kentucky Power President Matt Satterwhite testifies before the Kentucky Public Service Commission on Wednesday during the first day of the PSC’s hearing on the company’s rate review request.


FRANKFORT, Ky., December 6, 2017 – An expert witness for the Kentucky attorney’s office on Wednesday told the Kentucky Public Service Commission that his calculations justify a $39.9 million rate increase for Kentucky Power customers.

Ralph Smith, a regulatory consultant and a certified public accountant with Larkin & Associates in Livonia, Michigan, made his comments on the first day of a multi-day evidentiary hearing before the PSC concerning the company’s request to adjust its base rates. When asked by PSC if he stood by his filed testimony, Smith said, “Yes.”

In June, Kentucky Power filed a rate review request with the PSC seeking to recover $69.6 million from customers. A settlement reached last month and presented to the Commission for consideration lowered that request by $28.6 million to an overall increase of $34.7 million.

In addressing Smith, the Commission said, “The main objective is to have a fair and reasonable settlement of all parties involved, that’s the objective. How we get there depends on the testimony provided by witnesses like you. Commissioners also expressed concerns over reconciling a position taken by the attorney general’s office of no increase and Smith as the attorney general’s witness recommending $39.9 million. “There is a conundrum there.”

The Commission is conducting its official hearing this week on Kentucky Power’s request to ask questions and gather additional testimony before issuing a ruling. Commissioners can approve, modify or reject the settlement agreement. If approved, new rates would go into effect in mid-January.

The settlement proposes rates based on the opportunity to earn a return on equity of 9.75 percent, which Kentucky Power consider a vital component to attract investment. The settlement also provides a mechanism for Kentucky Power to recover 80 percent of its mandatory federal transmission expenses. The company had indicated that it would have to file another case immediately if the federal transmission costs were not accounted for in this case.

Kentucky Power President Matt Satterwhite testified that recovery of transmission costs are mandated by PJM, the regional grid operator that oversees transmission lines in Kentucky and 12 other states.

While on the stand, Satterwhite touted the benefits of the settlement agreement as offering a balance. He also testified that the Kentucky Power’s economic development efforts to bring industry and jobs to the region drives his decisions.

“It’s not just important, it’s vital. My No. 1 goal after the safety of my employees is economic development. We have to put all our efforts into there. We’ve got to tear down county lines and political lines and be one big region,” Satterwhite said. “We need to change the face of eastern Kentucky to bring diversity of industry.”

“I think what this case is doing is allowing a vital corporate partner to provide safe, reliable service as a key component of helping people locate in eastern Kentucky and bring in more companies. … It’s really an overall strategy of do you want to stick were you are or do you want a strategy that grows the entire region.”

As a result of the balance provided by the settlement, Kentucky Power agreed that if the agreement were approved, it would not seek an update to its general base rates until at least 2021. This essentially provides customers with a three-year stay out of changes to base rates.

Under the settlement agreement, the residential customer rate would increase approximately 9 percent. The original rate adjustment filing with the PSC had residential customer rates increasing about 16 percent. Commercial and industrial customer rates would increase 3 to 7 percent, down from a requested 7 to 14 percent, based on usage.

The ability to lower the rate request so dramatically in the settlement from the original filing is due in part to a $50 million deferral of expenses related to the generation of electricity at the coal-fired Rockport Plant in Indiana. Kentucky Power purchases 393 megawatts of coal-generated electricity from Rockport to serve eastern Kentucky customers. The deferral delays recovery of these allowable expenses to reduce the current rate effect on customers.

The settlement would decrease residential customer monthly contributions to Kentucky Power’s economic development program from 15 cents to 10 cents and increases commercial and industrial customer contributions to $1. All economic development fees collected from customers will continue to be matched by the company to generate nearly $1.1 million a year to invest back into eastern Kentucky.

Other provisions of the settlement include the extension of the Coal Plus program to assist in the opening of new coal operations in the region. About 80 percent of the electricity generated for Kentucky Power comes from the burning of coal.

“I’m just trying to help coal,” Satterwhite said.

Interveners in the rate review who reached a settlement agreement with Kentucky Power are the Kentucky School Boards Association, Kentucky League of Cities, Kentucky Industrial Utility Customers, Wal-Mart and the Kentucky Cable Telecommunications Association. The Kentucky Attorney General’s Office of Rate Intervention and the Kentucky Commercial Utility Customers did not sign the settlement agreement.

The Commission will continue its hearing on Kentucky Power’s rate case on Thursday.


Kentucky Power, with headquarters in Ashland, provides service to about 168,000 customers in 20 eastern Kentucky counties, including Boyd, Breathitt, Carter, Clay, Elliott, Floyd, Greenup, Johnson, Knott, Lawrence, Leslie, Letcher, Lewis, Magoffin, Martin, Morgan, Owsley, Perry, Pike and Rowan. Kentucky Power is an operating company in the American Electric Power system.




December 4, 2017

More than 100 states and cities are suing drug companies for role in epidemicMore than 100 states and cities are suing drug companies for role in epidemic

A few years ago, Mississippi Attorney General Jim Hood was worried about a friend’s son who served two tours in Iraq. After being injured overseas, he became dependent on prescription painkillers and eventually developed a heroin addiction.

But then, his friend’s son got into law school and showed signs of sobriety, so Hood offered him an internship in his office. A few days into the internship, he didn’t show up.

“We called his wife, and she went home to check up on him,” Hood says. “He was dead of an overdose.”

Shortly after that, in 2015, Hood became the first state attorney general to sue a prescription drugmaker for their role in the opioid epidemic. Since then, more than 100 states, cities and counties have filed similar lawsuits, with a new one popping up almost every week.

Lawrence County asked to join class action lawsuit

In Lawrence County, a Huntington, WVa law firm recently sent a representative to a fiscal court meeting who asked the county to join in a class action lawsuit to be filed against pharmaceutical companies who have channeled more than 400 million oxycodone pills into the Williamson-Kermit, WVa. area in the past three years. County attorney Mike Hogan advised court members to put off the question until the next month saying he prefers to join lawsuits that begin at the local level.

The court agreed but there was no representative present at the November meeting.

Drug dependency isn’t a new problem, but unlike most drug epidemics, the opioid one is largely driven by a legal industry. The National Institute on Drug Abuse estimates that 75 percent of people who enter treatment for a heroin addiction took their first opioid legally from a prescription.

States have tried to crack down on the problem, primarily with prescription drug monitoring databases that track what patients have been prescribed by doctors within and across states. But if addicts can’t get prescription painkillers, they typically resort to illegal drugs, including heroin, fentanyl and carfentanil. The latter two are at least 50 times stronger than heroin and can kill users within seconds.

The Centers for Disease Control and Prevention estimates that each day, 91 Americans die from overdosing on opioids. And it’s not just a human tragedy — the opioid epidemic has a financial cost, too.

“It’s devastated county and municipal budgets. There’s been a significant cost for law enforcement, first responders, for drug treatment, for lost productivity of government workers and for services like autopsies,” says Mark Chalos, a Nashville-based partner at Lieff Cabraser Heimann & Bernstein, LLP a law firm counseling some of the counties in Tennessee exploring lawsuits.

Some places in Tennessee, he says, can no longer afford to do autopsies for every suspected drug overdose, so it’s likely that the official count of deaths from the opioid epidemic “is just the floor.”

In addition to the 100-plus lawsuits, 41 states have banded together to subpoena information from four drug manufacturers: Endo, Johnson & Johnson’s Janssen unit, Teva Pharmaceutical and Allergan. They’ve also put in a request for more information to Purdue Pharma and drug distributors AmerisourceBergen, Cardinal Health and McKesson.

“If we get into those emails and executives are in the chain knowing what they’ve unleashed on the American public, I’m going to kick it over to a criminal lawsuit,” says Hood. “I’ve been to too many funerals.”

For now, all of the cases are civil. Most localities are seeking monetary damages to help them recoup the money lost to fighting the epidemic. Many of the lawsuits also hope to force drugmakers to change their marketing tactics, which they argue are deceptive, to make it more clear just how addictive the pills can be.

Tobacco Déjà Vu?

These cases have drawn comparisons to the lawsuits in the late 1990s against tobacco companies. As it happens, Mississippi led the way on that too. After Mike Moore, the state’s then-attorney general, took tobacco to court, 40 states followed.

“The lawsuit is premised on a simple notion,” Moore said at the time. “You caused the health crisis; you pay for it.”

It worked: The tobacco industry was court-ordered to pay more than $200 billion to states over 25 years. That cash is still rolling in and will be until 2025. Those lawsuits also resulted in significant policy changes, including a ban on most forms of outdoor advertising, including billboards and transit ads. Tobacco companies are also now banned from marketing to teenagers and were required to fund an anti-smoking advocacy group, which airs the Truth ad campaigns.

It’s too soon to say exactly how similarly the opioid cases will play out. But Chalos, the lawyer, says he’s “optimistic that the industry will be held accountable in the end.” He warns, however, that drugmakers have big resources and are expected to fight tooth and nail.

For their part, the drugmakers say they have taken steps to curb addiction and help states fight overdoses. In a statement to NBC News, Purdue Pharma said: “We are an industry leader in the development of abuse-deterrent technology, advocating for the use of prescription drug monitoring programs and supporting access to Naloxone — all important components for combating the opioid crisis.”

But most of the governments argue in their cases that drug companies violated consumer protection statutes by deceiving the medical community about the likelihood of addiction and inadvertently putting patients in danger. Many lawsuits are also claiming that drug companies committed Medicaid fraud by forcing taxpayers to pay for unnecessary prescriptions.

If a judge rules that drug companies violated consumer protection statutes, Hood says states could receive up to $10,000 per occurrence, which a judge could interpret as each prescription or each doctors visit. Either way, that would result in trillions of dollars for the state and local governments, he says. The court could also order the companies to reimburse states for drug treatment and unnecessary prescriptions paid for by Medicaid programs, he says.

“For every dollar that these companies have profited from, I want there to be a dollar that gets set aside for drug treatment,” says Hector Balderas, attorney general of New Mexico, who filed a lawsuit in September.

One significant difference between the opioid cases and the tobacco cases is that counties and cities are filing suit this time — not just the states.

“[The tobacco] litigation was successful, but states kept all that money. None of it flowed down to the counties,” says Paul Hanly, a partner with Simmons Hanly Conroy, which is representing more than a dozen counties in opioid lawsuits and has already settled similar cases on behalf of patients.

Because he’s been here before, Hanly warns it may take longer than many might like.

“Litigation like this typically lasts three to seven years. I’d be very surprised if we were resolved by this time next year,” he says.

What to Expect in 2018

In the meantime, while state and local governments fight these battles in court, drug overdose deaths are still climbing. A STAT investigation found that opioids could kill as many as 500,000 Americans in the next decade.

Jan Rader, fire chief in Huntington, W.Va., one of the cities that filed suit, says that surrounding Cabell County is expected to hit 2,000 overdose deaths this year.

“This is going to be our new normal for a while,” she says.

President Donald Trump declared the opioid epidemic a public health emergency last month, but neither he nor Congress have made extra money available for states and localities to deal with it.

Hood wishes Trump “would put his money where his mouth is” and pledge more money to combat the crisis. But he’s hopeful that drugmakers will eventually have to pay billions of dollars in damages for their role in the epidemic. He even predicts that some pharmaceutical companies will go bankrupt in the process.

“This needs to be a deterrent for the next 50 years,” he says. “We have to gorge them of their profits. They need to be made an example of.”

By Mattie Quinn
Governing Magazine


December 1, 2017


FRANKFORT, Ky. - The CJPAC Justice Reinvestment Work Group is projecting that, without significant legislative solutions, Kentucky’s inmate population will increase by 19 percent over the next ten years, overwhelming jails and prisons and burdening taxpayers with nearly $600 million in additional costs.

Kentucky Justice Secretary John Tilley, who chairs the group, said the growth is unsustainable given Kentucky’s pension crisis and other budgetary needs.

“We’ve reached a critical point that demands fiscal prudence and stronger accountability for both offenders and government,” Secretary Tilley said. “The good news is we have an opportunity to lower costs and improve public safety if we enact common-sense legislation next year. It’s time to bring stability and efficacy to our justice system.”

Under the Bevin administration, Kentucky enacted criminal justice reform earlier this year with Senate Bill 120, legislation to improve public safety and lower recidivism through stronger reentry programs. Gov. Bevin also supported and signed measures that allow expungement for low-level felonies and fair chance employment in the executive branch of state government.

Additionally, Gov. Bevin established the Work Group in August to perform a comprehensive review of Kentucky’s criminal justice system and advance policy changes that will safely lower the prison population while simultaneously improving public safety. The work is needed to bring Kentucky in line with the 31 states across the country that decreased both their prison populations and their crime rates between 2010 and 2015

Through an in-depth analysis of data from the Department of Corrections, the Work Group found that admissions to prison grew 32 percent in just five years, driven by low-level, nonviolent offenses. Sixty-five percent of admissions in 2016 were sentenced for drug and property offenses.

The Work Group also found that Kentucky imprisons women at a disproportionately high rate compared to other states. In 2015, Kentucky had the fifth highest female imprisonment rate in the country, almost twice the national average. Female admissions increased 54 percent from 2012 to 2016, driven by a 72 percent growth in admissions for Class D offenses, Kentucky’s lowest felony class.

At the same time, a 2016 report by the Annie E. Casey Foundation found that 13 percent of Kentucky children have an incarcerated parent – the highest rate in the country at nearly double the national average.

To cope with aging infrastructure and overcrowding, state officials earlier this month announced plans to move 800 prisoners to a private facility in Lee County. Officials say that, if the number of low-level, nonviolent offenders continues to swell, Kentucky will be forced to consider expanding reliance on costly private prisons.

“Without changes next year, there is no question we will have to contract for two additional private prisons or build new prisons, costing taxpayers millions and providing little benefit to public safety,” Secretary Tilley said. “However, this Work Group has gone through a data-driven reform process that offers better solutions -- not only to reduce recidivism but also to better protect our communities.”

Daniel Cameron, the spokesperson for the Smart on Crime Coalition, and a member of the Work Group, said of the findings “the Commonwealth must rethink how we are investing our resources. We are spending a significant amount of money incarcerating low level, nonviolent offenders when this funding could be directed at programs and services that have been found to hold offenders accountable while also helping to prevent reoffending.”

Rep. Jason Nemes, who is a member of the Work Group, said “our prisons are filled with nonviolent offenders with serious substance abuse and mental health problems, and we know that there are better ways to protect public safety and keep families whole than warehousing these people. The first step toward making resources available for treatment and rehabilitation is to take a serious look at our sentencing system, and decide how to prioritize our prison beds for people we’re scared of, rather than those we’re mad at or disappointed in.”

On Dec. 18, the Work Group plans to release a comprehensive set of recommendations to hold offenders accountable, create pathways to treatment rather than incarceration, and address the disproportionate number of women in Kentucky’s jails and prisons.