The Kentucky Public Service Commission issued $107,500 in fines for two gas companies that are based in Floyd County.
On Monday, the PSC fined Betsy Layne utilities B&H Gas and Johnson County Gas and their owner Bud Rife for 34 violations of state law and PSC orders.
Rife and his companies have until Aug. 28 to pay the fines.
The fines were assessed after the PSC found that both utilities took out unauthorized debt and failed to adjust gas costs, causing customers to be overcharged. In the order, the PSC cited its “longstanding concerns” about Rife’s management of both companies, including his lack of compliance with laws and regulations.
In the order, the PSC fined the two companies and Rife $45,000 for issuing nine loans totaling more than $1.7 million for B&H and $148,000 for Johnson County Gas without approval, as required, from the PSC.
All but one of these loans were to Rife and/or companies he owned, and he signed the loan documents as both the debtor and the lender.
The unauthorized loans were revealed last year in PSC cases in which B&H Gas and Johnson County Gas sought approval for rate increases. The companies cited debt as justification for the rate increase.
The PSC has been investigating the loans since February, and Rife and the two companies revoked the promissory notes and asked that the investigation be closed.
In March, Kentucky Attorney General Andy Beshear responded to that request in the case.
“The closely-held, closely-affiliated nature and structure of Mr. Rife’s enterprises has direct bearing on B&H’s rates,” Beshear wrote. “The failure to follow even basic accounting, financial and legal formalities, much less the affiliate accounting rules … result in abuse of the public trust, and place the financial solvency of these enterprises in question.”
On Monday, the PSC also fined Rife and Johnson County gas $62,500 for failing to file quarterly adjustments to the commodity cost of gas charged to customers. These filings are geared to reflect fluctuations in the natural gas market and allow utilities to recover its costs on a “dollar-for-dollar basis.”
The PSC found, however, that Johnson County Gas has not filed gas cost adjustments since 2013.
Rife testified in April, reporting that the failure to make these filings were due to a “litany of problems, including secretarial issues, an office move followed by an office fire and a bankruptcy proceeding,” the PSC reported.
“The excuses offered by Mr. Rife strain credulity and do not establish good cause for the violation of Johnson County’s tariff or the Commission Order,” the PSC said in the order.
The agency reported that it has “repeatedly chastised” Rife and the utility for failing to file the adjustments.
Monday’s order marks the second time a Rife-owned company had issues with the PSC for failing to make gas cost adjustments. In 2017, the PSC ordered B&H to refund customers $102,000 for overcharges caused by the failure to adjust gas costs.
The PSC reported in the order that the approved gas cost recovery has been about $4 per Mcf in recent gas cost adjustment filings in Kentucky, but Johnson County Gas’ rate has been more than $6.4 since 2013.
“Thus it would appear that by failing to file timely GCAs pursuant to its tariff, Johnson County is collecting a gas recovery cost that exceeds the actual costs of purchasing and transporting natural gas,” the order states.
The PSC ordered the utility to file its next gas cost adjustment by Sept. 1.
Headquartered in Betsy Layne, B&H Gas serves 258 customers in Floyd County and Johnson County Gas serves 315 customers in Johnson County.