Herald-Leader Editorial

Lawmakers hurt Ky. energy efforts; Veto bill to better negotiate with feds

March 28, 2014 

If you want to know why Gov. Steve Beshear should veto House Bill 388, consider how costly the legislature's last attempt at micromanaging energy policy could be for consumers and the economy.

Lawmakers probably didn't mean to saddle Eastern Kentuckians with a huge bill for a small amount of power when they carved out an exception in state law for a plan to generate about 60 megawatts by burning wood waste at a plant that would be built near Hazard.

But, as R.G. Dunlop of the Kentucky Center for Investigative Reporting detailed in the Herald-Leader, when politics and good intentions replace economic analysis, the price can get steep.

After the 2013 legislature enacted a law that more or less ordered the Public Service Commission to approve the deal, Kentucky Power agreed to pay ecoPower $50 million a year for electricity with a market value of $15 million. The $35 million difference would be passed on entirely to consumers.

The PSC had turned down a utility's request in 2010 to purchase wind power for $43 per megawatt hour. Compare that to EcoPower's $112.58 per megawatt hour, a rate that will rise by 2.25 percent a year under the 20-year contract.

The PSC turned down the wind-power deal because state law requires the lowest-cost option, which traditionally has been coal, though increasingly it's natural gas.

If it ever goes on line, ecoPower will cost the average residential customer an extra $100 a year and push up power bills for the Marathon refinery in Catlettsburg and AK Steel's Ashland Works by millions of dollars.

Together, the steel mill and refinery provide about 2,500 jobs. EcoPower would have 30 full-time employees and account for 225 timber and trucking jobs.

In 2011, this editorial page used ecoPower's inability to line up financing or customers under Kentucky's lowest-cost rule as an example of how the pro-coal policy could hamper economic development.

We were advocating a requirement that most states have for utilities to diversify their portfolios with smart investments in solar, wind, biomass and hydroelectric.

What Kentucky got instead was a special favor for one business, whose principals contributed to the campaign of state Sen. Brandon Smith, R-Hazard, sponsor of the bill that breezed through both chambers with no questioning or analysis.

This year, HB 388 breezed through both chambers and could also prove costly by tying the hands of this and future administrations as they negotiate with the federal government on regulating greenhouse gas emissions from power plants.

Kentucky energy officials have been attracting attention nationally with their ideas for how to reduce the emissions that cause climate change without devastating the economies of states like Kentucky where large employers require a lot of electricity.

EcoPower shows how tricky and costly energy decisions can be. HB 388 dictates pro-coal regulations that the feds would reject and robs Kentucky of any leverage.

You would expect the legislature to override the veto of a bill that passed by such wide margins.

But, with last year's blunder fresh in the public's mind, lawmakers might just let Beshear save them from again enacting energy policy with no analysis or regard for unintended costs.

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