Kentucky Power, a subsidiary of Ohio-based American Electric Power, serves about 175,000 customers in 20 eastern Kentucky counties. In 2007, the company signed a federal consent decree requiring it to close down the coal-fired plant in Lawrence County unless it could meet carbon emissions limits.
KPC originally sought a rate increase of roughly 31 percent from the Kentucky Public Service Commission in order to finance a $980 million installation of scrubbers at the plant. The rate increase was opposed by the Attorney General, rate-payers and environmental groups and KPC subsequently withdrew that request.
Instead KPC asked the PSC for permission to acquire half interest in the Mitchell Power Plant at Moundsville, W. Va., which is owned by Ohio Power, another AEP subsidiary, while closing the Big Sandy operation at an estimated cost of $536 million. The Moundsville facility has scrubbers. Eventually, KPC would convert the other coal-fired unit at Big Sandy to natural gas.
The PSC granted the request along with what ultimately will be a 14 percent rate increase with another 5 percent surcharge on rates to recover costs of the Mitchell transfer.
Attorney General Jack Conway – who opposed the original scrubbers plan – also opposed the final agreement, arguing KPC didn’t get an independent analysis of the relative cost options. His office has challenged the PSC order in Franklin Circuit Court.
But Ohio Power also planned to transfer the other half of the Mitchell Plant’s generating capacity to another AEP subsidiary which serves West Virginia and Virginia and those states utility regulators turned down that request.
Adkins has opposed the Mitchell transfer from the start, saying it will devastate the Lawrence County economy and further wound the already depressed eastern Kentucky coal market which produced 2.5 million tons of coal each year for the Big Sandy units.
So Adkins is sponsoring House Bill 573 which would require the PSC to re-evaluate such “multi-state” transactions and orders if a utility regulating commission in one of the other affected states didn’t approve the request.
But KPC President Greg Pauley told the House Committee on Tourism and Development and Energy the bill won’t accomplish what Adkins seeks to do because KPC’s purchase of half of Mitchell was not contingent upon sale of the other half to Appalachian Power.
“This bill does not get me and this bill does not get the Mitchell Power Plant,” Pauley said. “This bill opens up unintended future consequences.”
Such a deal would make it difficult or impossible for power companies to assure customers of a reliable rate for a determined period of time, he said, because the rate approved by PSC could always be reversed.
But Pauley also questioned Adkins’ account of the Mitchell transaction and KPC’s commitment to keep the Big Sandy Plant operating on coal. That didn’t sit well with committee members, most of whom support coal and live in eastern Kentucky.
Rep. John Short, D-Hindman, accused Pauley he of calling Adkins a liar and he doesn’t like KPC “going out of state to get our power and we’re going to have to pay for it but we’re not working” because of the depressed coal economy.
Rep. John Will Stacy, D-West Liberty, was more direct.
“Mr. Pauley, you talk a little bit out of both sides of your mouth,” Stacy said. “I have a little problem trusting someone who rolls in here from Ohio with his glasses on the top of his head.”
But Rep. Brian Linder, R-Dry Ridge, who works for Owen Electric Cooperative, said there would be no way to equip Big Sandy with scrubbers without at least a 30 percent rate increase. Nor is it clear whether the PSC – if ordered by the legislature to do so – could re-open the case while it’s in litigation.
But the largely pro-coal membership of the committee voted to send the measure to the House Floor. Later Thursday, House Speaker Greg Stumbo, D-Prestonsburg, said he supports the bill.