A proposal approved by the Kentucky Public Service Commission (PSC) for the Kentucky Power Co. to purchase a half interest in a power plant in West Virginia may save the company millions of dollars and keep electricity rates from skyrocketing, but will also result in job losses and decreased tax revenue in the region during an already shaky economic time.
Kentucky Power was authorized on Monday to purchase a 50 percent interest in Ohio Power Company’s Mitchell power plant in Moundsville, W. Va., which has 780 megawatts (MW) of coal-fired capacity, as a replacement for an 800-MW coal-fired unit at Kentucky Power’s Big Sandy plant near Louisa.
Under a 2007 federal court consent decree, Kentucky Power had agreed to close the Big Sandy unit until mid-2015 if it was not upgraded to meet stricter air emission standards. The company, which serves 173,000 rate payers in 20 counties in the region, had withdrawn a previous proposal to retrofit the Big Sandy unit with an emission-removing scrubber, and decided to close it instead.
According to a press release from the PSC, the Mitchell purchase will cost around $536 million, compared to the $1 billion bill of upgrading the Big Sandy unit, and will cost ratepayers around $59 million less per year. And, though Kentucky Power customers can expect an eventual rate increase of 14 percent, the Big Sandy upgrade would have increased rates by nearly double that.
Objections were heard from the community of Louisa to the inevitable job loss from the proposal from leaders like Rep. Rocky Adkins, who represents Lawrence County, and Lawrence County Attorney Michael Hogan. The PSC could not take those objections into consideration, though, since the statutory standard in this case only applies to the necessity of the Mitchell purchase in light of the closing of the Big Sandy unit.
“Thus, arguments on economic benefits to specific areas of Kentucky Power’s service territory are beyond the scope of the Commission’s jurisdiction,” the PSC wrote in its order.
However, the PSC noted in the order that “the shutdown of the larger Big Sandy unit will result in job losses and a sharp decrease in tax revenue in Lawrence County, with the economic effects extending to neighboring counties as well,” according to the press release. Because of this, Kentucky Power is required to spend at least $233,000 a year for the next five years on economic development efforts in the area. The Kentucky Community and Technical College System is to receive $33,000 for job training programs focused on weatherization and energy efficiency.
The PSC made other changes to the company’s original proposal, including removing a provision that would have allowed Kentucky Power to potentially recover the $28.1 million it spent other eight years to study whether or not to upgrade the Big Sandy plant from ratepayers, and doubling the spending—to $6 million a year—on the company’s program to help its customers save energy through measures such as weatherization.
Kentucky Power has a week to decide if it will accept the proposal as it has been modified by the PSC.