Ratify Execution of Authorization to Implement New Arrangements for Obtaining Compensation for SEPA Energy:

Monday, April 30, 2007, Tom Trauger of Spiegel & McDiarmid submitted a form requesting that he be authorized to act as the Board’s Agent in SEPA negotiations related to new compensation arrangement for the Board’s SEPA Energy for the remainder of 2007.

Since the elevation of Cumberland Lake was reduced to 680 feet, the output of SEPA Energy has been reduced and KU/LG&E has chosen not to receive all the SEPA Energy that is available.  Under the terms of the SEPA contract, unused energy is automatically delivered to TVA at a lower price.  The Kentucky Municipal SEPA Negotiating Team (Tom Trauger, Brown Thornton, Bob Hunzinger and Warner Caines), have been negotiating an alternative proposal where the Kentucky Municipals’ SEPA Energy would be sold to another party.  When generation at Wolf Creek Dam returns to normal, the arrangement withKU/LG&E would be restored under the terms of the existing contract.

The form also authorizes Owensboro Municipal Utility in Owensboro, Kentucky to act as the Plant Board’s Agent in receiving  the total payment on behalf of SEPA customers for the sale of the collective SEPA Energy to the new purchaser, and to transfer to each SEPA customer the allocated proportional share of monies received.

Due to the urgency related to a possible delay in obtaining authorization of each Kentucky Municipal involved, Chairman Joe Smith signed the Authorization Form.  It is therefore recommended that the Board ratify Mr. Smith’s authorization.