To pay less as electric rates rise, Kentuckians will have to be pro-active

EPA rules leading to unavoidable charges

ssloan@herald-leader.comSeptember 6, 2011 

  • If you go

    Kentucky Public Service Commission public meeting

    Purpose: To take public comment on Kentucky Utilities' request for higher environmental surcharges to comply with revised EPA rules.

    When: 5:30 p.m. Sept. 7

    Where: Auditorium at Bryan Station High School, 201 Eastin Rd.

  • Kentucky Power

    Service area

    Kentucky Power serves 173,000 homes and businesses in all or parts of 20 counties.

    Coal-fired power plants

    Big Sandy: A plant north of Louisa with two units totaling 1,078 megawatts. Kentucky Power is evaluating whether to install new pollution controls or shut down the units and replace them with natural gas-fueled production.

    Residential energy efficiency programs

    Modified energy fitness: Receive a free energy audit if you meet certain qualifications.

    HVAC diagnostic and tune-up: $50 incentives for receiving a tune-up service.

    High-efficiency heat pump: $400 incentives to upgrade home heating systems.

    Mobile home high-efficiency heat pump: $400 incentives to upgrade mobile homes' heating systems.

    Mobile home new construction: $500 incentives to buy homes with certain insulation levels and heating systems.

    Targeted energy efficiency: Weatherization and energy- efficiency services for low-income residents.

    Community outreach CFL: Free distribution of compact fluorescent light bulbs at selected community events.

    Residential efficient products: Offers instant rebates at stores on CFL bulbs.

    Learn more: Kentuckypower.com/save/programs or 1-800-572-1113

  • East Kentucky Power Cooperative

    Service area

    The cooperative provides power for 16 member co-ops that serve 520,000 homes, farms and businesses in 87 counties.

    Coal-fired power plants

    Spurlock: Four units in Maysville totaling 1,346 megawatts.

    Cooper: Two units near Somerset totaling 341 MW.

    Dale: Four units at Ford totaling 195 MW.

    East Kentucky Power has spent more than $1.7 billion during the past decade to upgrade its plants, partly due to agreements with the EPA to settle lawsuits against the co-op. The co-op has hired a consultant to examine its plants to determine options for compliance with the new rules.

    Residential energy efficiency programs

    Here are programs sponsored by the 16 cooperatives that make up East Kentucky Power. Not all of the member co-ops utilize each program.

    Home energy audits: Free audits for residential customers.

    SimpleSaver direct load control: Allows the co-op to briefly manage the energy usage of your air conditioner and/or water heater during the highest usage days. Participants receive $5 credits on monthly bills from July to September and also can receive a $10 credit in January for enrolling their water heaters.

    Button-up weatherization: Provides incentives to cover portions of weatherization costs at qualifying homes.

    Free light bulbs: More than 700,000 compact fluorescent bulbs distributed since 2003, primarily during the co-ops' annual meetings.

    Tune-up HVAC maintenance: Contractors seal qualifying homes' ductwork for $50, far less than the typical market cost of $300.

    Air source heat pump: Incentive to convert heating system to be more efficient.

    Electric thermal storage: Incentive to buy device that stores heat during low-usage times and uses it at higher-usage times at homes.

    Learn more: Ekpc.coop

  • Other Options

    In addition to utilities, these organizations are among those offering energy-efficiency advice and assistance:

    KY Home Performance: Kyhomeperformance.org

    How$martKy: Maced.org/howsmart-overview.htm

    Kentucky Housing Corp.'s Weatherization Assistance Program: Kyhousing.org; click on "Housing Production"

  • Kentucky Utilities

    Service area

    KU serves 540,000 homes and businesses in 77 counties.

    Coal-fired power plants

    Ghent: The plant north of Ghent along the Ohio River opened in 1973. Four units there total 1,932 megawatts. The utility plans to spend roughly $712 million to help capture more particulate matter and mercury, and reduce emissions of nitrous oxide to comply with revised EPA rules.

    Tyrone: The coal-fired plant along the Kentucky River between Versailles and Lawrenceburg opened in 1947. Its coal-fired unit produces 75 MW of electricity but is used infrequently. The utility expects to retire the plant rather than upgrade it to comply with the EPA rules. KU expects to file plans this month on how it will replace the lost capacity.

    E.W. Brown: The three coal-fired units along Herrington Lake opened in 1957 and produce 749 MW of electricity. KU plans to spend $402 million to convert wet pond storage for coal ash to a dry landfill and to purchase enhanced devices to capture more particulate matter and mercury.

    Green River: The two units along the waterway near Central City opened in 1950 and produce 163 MW. The utility expects to retire the plant rather than upgrade it to comply with the EPA rules. KU expects to file plans this month on how it will replace the lost capacity.

    Residential energy efficiency programs

    Air-conditioner testing: The program offers residential customers discounted A/C tests for $35 and tune-ups, if needed, for $50 to help ensure their air-conditioning systems are running efficiently.

    Demand conservation: Allows KU to control air conditioners and turn them down during the highest usage days. Receive $5 off your bill in June, July, August and September.

    Residential energy audit: Incentives range from $500 to $1,000 for installation of recommended energy efficiency measures. Charge is $25 per in-person audit and free if conducted online.

    WeCare: Assistance to low-income residents through weatherization.

    High efficiency lighting: Receive free high-efficiency compact fluorescent bulbs.

    Upcoming programs: KU has asked the state Public Service Commission for permission to introduce programs that feature ways to compare your usage to that of other customers, offer rebates ranging from $50 to $300 for certain appliances and other equipment, and pay customers $30 to remove and recycle working secondary refrigerators and freezers.

    Learn more: Lge-ku.com/ee

  • Duke Energy

    Service area

    Duke Energy serves 135,000 homes and businesses in seven counties in Northern Kentucky.

    Coal-fired power plants

    East Bend: The 650-megawatt plant in Boone County is being examined to see what upgrades will be required to meet revised EPA regulations. "It is difficult to determine yet what upgrades might be needed at East Bend until EPA finalizes some of the more-encompassing regulations pending today," spokeswoman Erin Culbert said.

    Miami Fort: The sixth unit at this Ohio facility that serves Kentucky will be retired by 2015 because of the revised EPA rules.

    Residential energy efficiency programs

    Home energy house call: Free in-home energy assessment.

    Smart $aver: Cash rebates for qualifying high-efficiency heating and cooling systems.

    Power manager: Allows Duke Energy to control your air conditioner and turn it down during the highest usage days. Participants receive varying credits depending on the price of electricity at the time.

    Low-income home energy assistance: Assistance to low-income households with home heating costs.

    Kentucky home weatherization: Free home weatherization for low-income residents.

    Learn more: Duke-energy.com/kentucky/savings.asp

There's no doubt that Kentucky's electricity bills are on the rise, as utilities sort out how much it will cost them to comply with new federal environmental regulations. Kentucky Utilities, the largest electricity provider in Central Kentucky, has asked the state Public Service Commission for permission to increase the average customer's monthly bill more than 12 percent by 2016. The state regulatory body will hear the concerns and questions of Lexington residents Wednesday night at a public meeting at Bryan Station High School.

But this case is far different than those that are familiar to most people. It's not about base rates, which look at the price for a kilowatt hour of electricity. It's about the environmental surcharge you find on your bills.

The difference is stark. Rate cases typically see utilities ask the commission for a large increase, almost always to find themselves receiving something less. In fact, there have been occasions when the PSC has said rates had to fall instead of rise.

In the case of environmental surcharges, though, the commission is far more restricted. State law is structured so that the presumption is utilities will be able to recover their costs because federal law requires them to adhere to the new standards.

It leaves far less room for debate and hammers home the idea that Kentuckians must realize "the only defense against rising electric rates is really to use less electricity," said PSC spokesman Andrew Melnykovych.

And there's no shortage of ways to make that happen. Electric companies offer a number of energy-efficiency programs that they hope will see increased interest from customers, and there are non-profits around to help, too.

Making sense of increases

Behind the increases are recent rules adopted by the federal Environmental Protection Agency. Among the changes affecting Kentucky utilities most is stronger regulation of mercury. Mercury is emitted in coal combustion and becomes part of soot.

"One of the big things utilities are having to do now to comply with the upcoming mercury standard is to install better pollution controls to limit soot emissions," Melnykovych said.

Another rule further regulates coal ash impoundments, which affects KU as well.

The general consensus nationwide is that energy created with coal was the biggest loser in the new round of regulations, and that means much change for a state in which more than 95 percent of electricity is produced by coal.

The regulations have utilities analyzing the best ways to produce energy going forward. East Kentucky Power Cooperative, which made a wave of improvements in recent years as part of settlements to EPA lawsuits, has hired a consultant to examine its plants. The consultant's report is expected to be completed next year, spokesman Nick Comer said.

As a result of the new rules, Duke Energy, which operates in Northern Kentucky, plans to retire an Ohio-based unit that supplies power to Kentucky. Kentucky Power's lone plant in the state, Big Sandy, north of Louisa, also is being examined.

The utility is considering whether to turn it off and restart it as a natural gas-powered unit, said spokesman Ronn Robinson. Another option is to install scrubbers to reduce emissions, but that would cost hundreds of millions of dollars, he said.

"It's all going to be very expensive and will all be reflected eventually in costs to ratepayers," Robinson said.

KU became the first utility to reveal its plans when it announced in May it would ask the PSC for permission to charge customers $1.1 billion to upgrade its Ghent and E.W. Brown plants. It plans to retire two others and will unveil this month how it will replace that capacity.

For a residential customer using 1,000 kilowatt hours a month, the initial monthly increase would be $1.13 during 2012 and the maximum would be $9.46 a month in 2016, according to the utility.

"We do understand the financial burdens we're putting on our customers, but we always have been and will continue to comply with the EPA regulations," spokeswoman Chris Whelan said.

Saving on your bill

So what can electric customers do in the face of such powerful headwinds? Lots.

"We offer a variety of programs that help educate our customers about how to use energy wisely and gives them incentives to use energy wisely," Whelan said.

The same goes for other utilities and a number of organizations that offer assistance.

But the interest hasn't been as high as many would hope.

"It's not like a huge amount of people are calling us every day," said Gina Chamberlain, executive director of the Berea non-profit home energy auditor Home Energy Partners. "I think there were some folks in the industry who thought the market would be much larger than this.

"It'll grow, but it'll be slow-growing as these jumps in bills happen."

Elizabeth Crowe, executive director of the Kentucky Environmental Foundation, said there was still an incorrect stereotype that "energy efficiency means lights off — that you're going to be reading by candlelight and shivering."

"Energy efficiency is about using it more wisely and not suffering," she said.

One easy solution, she said, is to caulk around windows and other leaky areas.

"One tube of caulk in the right places will solve a lot of problems with leaking through holes and cracks that individually might not seem like much but together can mean a lot of energy wasted," she said.

One KU program that reduces bills is its demand conservation option, in which the utility controls a resident's air conditioner and cycles it off at times during the hottest days of the year to reduce the amount of energy that must be produced at certain times. It doesn't necessarily reduce energy usage because cycling times are just moved to other times of the day, but customers receive a $5 discount on their monthly bills during June, July, August and September.

Between KU and its sister company, Louisville Gas & Electric, a little less than 10 percent of customers are enrolled. To help spur more interest, KU has asked the PSC for permission to tweak the incentives further.

One of the obstacles to increased usage of energy-efficiency programs is Kentucky's historically low rates, said Tona Barkley, vice chairwoman of a collaborative organization bringing together environmental groups with East Kentucky Power leadership.

"I do think that as bills go up and hopefully the threat of climate change becomes more real to people, they're going to understand how important that is," she said.

Melnykovych of the PSC said the experience nationwide is that higher bills should kick-start more interest. Just look at gasoline prices, he said.

"What happens when the price of gasoline goes up?" he said. "People start driving less, which is energy conservation, and they start buying more fuel-efficient vehicles, which is energy efficiency. ...

"We've got a lot of opportunities in Kentucky to make relatively modest investment in energy efficiency and reap a fairly substantial return."

An emerging program that's gaining favor is on-bill financing that allows people who might not be able to afford energy-efficient improvements to pay for them slowly as part of their monthly bills.

One such program is How$martKY, which is organized by the Mountain Association for Community Economic Development and four rural cooperatives in Eastern Kentucky.

Another outside organization is Kentucky Home Performance, a partnership of state organizations. Ken Slattery, a program director, said higher bills this summer linked to air-conditioner use have generated more interest in the organization's home assessments.

Since the program was launched late last year, it has seen 200 completed jobs in which residents have had more energy-efficient appliances installed and received the promised monetary incentives that come with the change.

The program has put most of its funding into the incentives instead of advertising and is relying more on word-of-mouth referrals for now, he said.

Barkley noted, too, that raising the profile of energy efficiency is going to "take a lot more than just putting it out there and doing some advertising."

"There's going to have to be a lot more of a one-on-one interaction with customers, members and clients," she said. "It's going to take more staff people to make these things work."

Brighter future? Maybe not

The EPA continues to examine other rules, making it "impossible to predict where that's all going to shake out," Melnykovych said.

"The big thing looming out there that nobody knows what's going to happen with is carbon," he said. "Those are things that are not even factored into this round of environmental compliance costs."

For KU, it also has to determine how to replace the energy it will lose when it retires two of its coal-fired plants. That probably would amount to hundreds of millions of dollars.

But even with those costs, Kentucky Power's Robinson has a sobering message for consumers used to cheap power.

"Even if we didn't have to do anything at our Big Sandy plant to comply with the EPA, you can still expect the price of electricity to increase," he said. "It's like any other item or consumable good, you're going to have increased costs related to operating your business.

"The more you can help offset your usage, the more you're going to save yourself."

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