Daily Independent (Ashland, KY)

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December 4, 2013

Conway keeps fighting for Big Sandy Plant

FRANKFORT — The battle over the closing of coal fired units at the Kentucky Power Company Big Sandy Plant in Louisa isn’t over just yet.

On Wednesday, Kentucky Attorney General Jack Conway filed an appeal in Franklin Circuit Court of the Kentucky Public Service Commission’s approval of KPC’s plan to acquire half interest in a Moundsville, W.Va., coal-fired plant owned by a sister company.

In October, the PSC granted KPC approval to acquire 50 percent interest in the West Virginia plant to supply power to about 173,000 customers in 20 eastern Kentucky counties which will allow the company to comply with a 2007 federal consent decree to reduce emissions at the Big Sandy facility or close it by 2015.

That is expected to cost $536 million. The PSC approved a 5 percent surcharge to recover a portion of the transfer costs beginning in January. Base rates are frozen under the agreement through May 2015 but will eventually rise by an estimated 14 percent.

Originally, KPC sought to install scrubbers at Big Sandy at a cost of $980 million which would have increased rates by approximately 30 percent. That plan was opposed by intervening parties, The Sierra Club, the Kentucky Industrial Utility Customers, and Conway but supported by some in the coal-producing region of Eastern Kentucky.

KPC later withdrew that request and agreed to a stipulated agreement with the Sierra Club and the KIUC to purchase the Moundsville plant which already has scrubbers to replace Unit 2 at Big Sandy. The PSC approved that agreement, but Conway did not sign on, contending KPC did not fully investigate alternative options.

In his appeal, Conway argues the company utilized a study of the least cost options performed by its parent company, American Electric Power, without an independent analysis and the PSC ruling is “unreasonable and unlawful” because it relied on that evidence without independent verification.

“The recent ruling by the Kentucky Public Service Commission approving this transaction will place more than a half a billion dollars into Kentucky Power’s rate base and will ultimately raise consumers’ electric rates by more than 20 percent,” Conway said in a written statement. “It will also transfer energy production to a neighboring state and leave Kentucky consumers paying the bill. That’s just not fair.”

PSC spokesman Andrew Melnykovych said “the PSC will address the Attorney General’s filing only through its formal and legal filings, as this is the only appropriate avenue for a response.”

Ronn Robinson of KPC said that while Conway has the right to appeal the PSC decision as one of the intervening parties, the company “believes (the agreement) remains the least cost option for our ratepayers and the PSC has spoken clearly on this issue.”

The loss of the Big Sandy coal-fired units is expected to cost about $900 million in lost tax revenues for Lawrence County and about 150 direct jobs at the facility which previously consumed around 2.5 million tons of coal annually. The agreement was bitterly opposed by Lawrence County officials and coal-field lawmakers, led by Rep. Rocky Adkins.

A news release from Conway’s office Wednesday criticized the agreement to purchase half interest in the Moundsville plant “instead of retrofitting the Big Sandy facility in Louisa, Kentucky.” But Conway’s office opposed the original plan to install scrubbers at Big Sandy.

The OAG did so, according to Conway spokesman Daniel Kemp, because the company failed to issue a Request for Proposal or submit an analysis to independently verify it was a least-cost option as required by law.

In a May 2012 briefing submitted to the PSC, Conway’s office argued installation of scrubbers could produce “major rate increases,” larger than any KPC’s customers had faced in decades.

“The potential ramifications are so great, in fact, that they would likely carry a significant impact on the viability of the economy of the counties” in KPC’s service area and might induce “major industrial customers to leave KPCo’s territory.”

Kemp said Conway’s position “remains consistent – regardless of fuel source, Kentucky Power’s plan in response to the EPA should be the least-cost and should not result in economically infeasible or unreasonable rates for ratepayers.”

RONNIE ELLIS writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

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