Jun. 7--Despite losing the first round of a regulatory battle, cash-strapped Big Rivers Electric Corp. will continue seeking a 21.6 percent wholesale rate increase to try to stay afloat.

If successful, the Henderson supplier would pass along those costs to distributors, translating into a 12.5 percent retail increase. That would mean an average $9 to $12 more monthly for residents and small businesses that comprise the bulk of 111,000 customers in parts of 22 western Kentucky counties.

The complex case is integral to the health of the western Kentucky aluminum industry, hard hit from the recession and plummeting metal prices. Roughly 3,500 smelting jobs hinge on holding down the cost of long-term power contracts.

Earlier this year, Big Rivers told the Kentucky Public Service Commission that it had adequate cash reserves until it made a $109.3 million payment last September to terminate a leveraged lease. Without the rate increase, the company would have too little cash to make two early 2010 debt payments totaling $28.2 million. In fact, Big Rivers would have nearly a $14 million negative cash balance by Jan. 5, 2010.

Higher rates sought starting April 1 were intended to boost income by $16.6 million this year and nearly $25 million a year thereafter.

On May 27, the commission denied Big Rivers' request for an emergency rate increase, saying the company still had a short-term line of credit available and had not fully explored other short-term loans to make the payments.

The PSC is reviewing Big Rivers' long-term application to raise rates and has moved the effective date back to Sept. 1.

"It's a concern to us that Big Rivers is not a financially strong organization," said Kelly Nuckols, president of Paducah-based Jackson Purchase Energy Corp. "They're still in business, but it's a problem when you have no borrowing capacity."

JPEC's 30,000 member-customers actually have joint ownership in Big Rivers, as do 55,000 Kenergy customers from Eddyville to Hawesville in Hancock County, and 26,000 members of Meade County Rural Electric Cooperative Corp.

The co-ops have enjoyed some of the cheapest power in the nation in recent years. But down the road they may have to renegotiate their Big Rivers contracts for more security, Nuckols said.

Complex deal

Big Rivers has been in serious financial trouble before, having filed for bankruptcy reorganization in 1996. It owed the federal government more than $1 billion borrowed to build power plants projected as necessary to meet demand, but the demand never materialized.