By RONNIE ELLIS
CNHI News Service
Ratepayers in 20 eastern Kentucky counties will see slower increases in electrical rates after the Public Service Commission Monday approved a request by Kentucky Power to purchase half interest in a West Virginia power plant while closing its Big Sandy unit at Louisa.
But Lawrence County and the Lawrence County Schools will lose nearly $1 million in property taxes and the region is likely to see more coal-related jobs losses.
Under the conditional agreement, Kentucky Power may now buy half-interest in Ohio Power Company’s Mitchell Power Plant just south of Moundsville, W.Va. Both companies are subsidiaries of American Electric Power.
The PSC concluded that is less costly than retrofitting Big Sandy with emission control devices called scrubbers.
County Judge/Executive John Osborne, County Attorney Mike Hogan and state Rep. Rocky Adkins, D-Catlettsburg, appealed to the PSC in July to reconsider the costs of installing scrubbers in order to maintain existing jobs at the Big Sandy Plant and allow it to continue purchasing coal.
The PSC order indicated it took note of those pleas and directed Kentucky Power to “more than double the amount of shareholder money it had voluntarily agreed to spend on economic development” in the area to offset those job losses and reductions in coal use by the plant.
The commission will require Kentucky Power to spend at least $233,000 in each of the next five years with $33,000 going to training programs through the Kentucky Community and Technical College System focused on weatherization and energy efficiency.
Adkins on Monday called the PSC decision “disappointing and devastating,” citing the loss of more than 150 jobs at the Louisa plant, lost tax revenues for Lawrence County government and schools, and the impact on the regional coal industry.
The company has a week to accept the order and KPC spokesman Ron Robinson said the company is still evaluating it and its stipulations.
“It’s a big order and we need time to evaluate it,” Robinson said. “But we’re pleased they see the transfer as the lowest cost option which was our position all along.”
(Osborne was traveling out of town and Hogan was with a family member undergoing surgery Monday afternoon and neither could be reached for comment.)
A spokesman for Attorney General Jack Conway, who represents consumers in rate cases, also expressed disappointment, saying the attorney general is “exploring our legal options regarding the ruling.”
“Kentucky Power did not thoroughly evaluate other options available to it, such as purchasing the power on the market from other electric utilities,” said Daniel Kemp. “Additionally, the company did not conduct an economic feasibility study, as the law requires, to determine whether its ratepayers could afford the increased rates that will result from this plan.”
KPC agreed under a 2007 federal court consent decree to close an 800-MW coal-fired unit at the Big Sandy facility by mid-2015 unless it was upgraded to meet stricter carbon emissions standards.
Initially, the company asked for authority to retrofit the unit with scrubbers at a cost of $980 million. KPC later withdrew that request, replacing it with the request to purchase half the Moundsville plant at a cost of $536 million.
The PSC said purchasing the Moundsville plant — which has scrubbers — will cost 173,000 ratepayers in 20 eastern Kentucky counties “about $59 million less per year” than installing scrubbers at Big Sandy.
“The Mitchell acquisition eventually will increase Kentucky Power’s rates by about 14 percent while a Big Sandy upgrade would have increased rates by 26 percent,” the PSC order said.
The commission’s order said its authority only applies to whether the Mitchell acquisition is necessary and if it’s the lowest cost option.
“Thus the arguments on economic benefits to specific areas of Kentucky Power’s service territory are beyond the scope of the commission’s jurisdiction,” the PSC order said.
The decision also incorporates an earlier agreement by KPC and two intervening groups, the Kentucky Industrial Utility Customers, Inc., and the Sierra Club to freeze rates until May 31, 2015. It removed a provision, however, permitting KPC to pass onto ratepayers $28 million in costs to study whether or not to upgrade Big Sandy.
Adkins said he and Hogan previously discussed asking the PSC to reconsider if the commission chose to approve KPC’s request and said Monday they’re likely to do that.
“I don’t think there was a fair calculation of what is the lowest cost option,” Adkins said. “I’m thoroughly convinced putting scrubbers on at Big Sandy is the low-cost option in the short run and the low-cost option over the next 30 years.”
RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at email@example.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.