The state Public Service Commission announced Thursday it will review whether East Kentucky Power Cooperative needs to build a controversial coal-fired power plant in Clark County.
The project has become a lightning rod for environmentalists who say it's too costly and will produce too much pollution.
The PSC will examine whether the proposal is the least-costly option for meeting customer demand and what effect construction of the Smith plant would have on the co-op's overall finances, which have deteriorated in recent years.
The PSC gave its blessing for the plant in 2005, when East Kentucky Power planned to bring a 17th co-op, Warren Rural Electric, into its fold. However, Warren later pulled out of the deal. The PSC then approved a revised version of the power plant plan that included fewer natural-gas-powered turbines. The turbines are used on days with extreme temperatures to help meet extra demand.
There is no time limit for how long the review by the PSC might last. A public hearing is expected this year.
Should the PSC withdraw its approval of the plan, it essentially would kill the idea because the utility could not recover the project's costs through rate increases.
The PSC's review is another setback this year for the plant. In April, the co-op itself asked to delay PSC approval needed for up to $900 million in financing for the plant. While East Kentucky Power would have obtained the money from banks and other lenders, such action requires the approval of the three-person commission, which regulates utilities in Kentucky.
The cooperative's leadership said at the time that it thought financial prudence required it to reassess its immediate need for financing. The cooperative stated it would refile the application "pending this reassessment."
Spokesman Nick Comer said Thursday that the co-op is continuing to reassess whether it needs the plant.
"East Kentucky has been in the process of developing or plans to develop a lot of the information that's asked for in the order," Comer said.
Asked what it might do, Comer said, "As our CEO has said, all options are on the table."
Financial issues
Finances have been a major issue in recent years for the co-op, which produces power for 16 member co-ops that serve more than 500,000 homes, farms and businesses throughout Central and Eastern Kentucky. The co-op lost money during 2004 and 2005 and narrowly had a profit in 2006. It since has applied for and received approval for two rate increases, and this year it requested another increase.
The cost of the plant is among the factors most often pointed to by its opponents. Nationally, financing of coal-fired plants has become a major issue. In the past, cooperatives nationwide had access to cheap money from the federal government, but concern about the carbon footprint of coal-produced power has helped choke off that funding.
Environmentalists have assailed the plant with studies detailing the pollution it would emit. The U.S. Environmental Protection Agency also has criticized the plans recently and objected to methods used by the state Division for Air Quality in granting the project a permit.
The PSC's moves were praised by Lauren McGrath of the Sierra Club, which has opposed the plant. The opposition also includes the Kentucky Environmental Foundation and Kentuckians for the Commonwealth.
"Our major concern at this point is (the co-op is) not taking it seriously enough to protect ratepayers and make investments in cleaner energy ..." McGrath said. "Ultimately, we want to see EKPC be the one to say, 'We're going to pull the plug on Smith and invest in energy efficiency and clean energy.' "
The PSC review of the need for the plant will not focus on the environmental questions raised; that is outside its jurisdiction.
However, the opponents might bring up those concerns in the context of how federal environmental regulation could affect costs and financing.
