Kentucky Power will be able to buy a half-interest in a power plant in West Virginia to replace the Big Sandy Power Plant in Lawrence County.
The Kentucky Public Service Commission conditionally approved the proposal today. It will let Kentucky Power buy 780 megawatts of coal-fired electricity from the Mitchell Power Plant near Moundsville, West Virginia. That capacity will replace 800 megawatts from Big Sandy, which is scheduled to be closed by mid-2015. Kentucky Power initially proposed upgrading Big Sandy, but then determined it wouldn’t be cost-effective to install advanced pollution controls so it could both keep burning coal and comply with stricter air pollution regulations.
In addition to buying part of the Mitchell plant, Kentucky Power also plans to seek PSC approval to convert part of Big Sandy into a natural gas generating unit.
The deal the PSC approved also includes most of the terms that Kentucky Power, the Kentucky Industrial Utility Customers and the Sierra Club agreed to in a settlement earlier this summer. Those include:
- A freeze on Kentucky Power’s base rates until May, 31, 2015, and withdrawal of a pending application to increase rates by 24 percent.
- A $44 million annual limit, to extend for 17 months, on recovery of costs associated with the Mitchell acquisition, with the recovery coming via a surcharge.
- A pledge to contribute $100,000 annually to economic development efforts in Lawrence and five neighboring counties, including at least $33,000 annually on job training. (The PSC modified this provision, to $233,000 annually for the next five years.)
- A 20-percent increase in Kentucky Power’s shareholder contribution to its energy assistance program for low-income ratepayers.
- A doubling, to $6 million per year, of Kentucky Power’s program to help its customers save energy through measures such as weatherization.
- A commitment by Kentucky Power to consider the purchase of 100 MW of wind power the next time the company seeks additional generating capacity.
The Mitchell purchase will cost about $536 million, and is expected to raise rates by about 14 percent. Upgrading Big Sandy was estimated to cost nearly $1 billion, and would have raised rates by 26 percent.