The future appears uncertain for a Hazard plant that would burn biomass to make electricity because of a court ruling striking down its contract to sell power to a utility.
A state Court of Appeals panel ruled 3-0 that there was no evidence the rate increases Kentucky Power requested as part of the deal were fair, just or reasonable, as required by law.
The decision cited testimony that the contract with ecoPower Generation LLC would mean an increase in the average residential bill of a Kentucky Power customer of up to 7 percent the first year — or about an extra $100 — and an increase of up to 13 percent in later years.
The court said there was no evidence the higher rates would result in an economic benefit to customers or the region.
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To the contrary, there was evidence the deal would strip away more jobs and money from the tax base in the region than it would add because people paying more for electricity would have less money for other things, the appeals panel said.
The appeals court ordered the case sent back to the state Public Service Commission for a decision denying Kentucky Power’s request to have customers pay to buy electricity produced by ecoPower Generation.
Kentucky Power has about 170,000 customers in 20 Eastern Kentucky counties.
Allison Barker, spokeswoman for the utility, said Tuesday that it was disappointed in the decision.
Kentucky Power could appeal. Barker said the utility was reviewing the court ruling and its options, and will do what it believes is in the best interest of customers.
The PSC also could appeal. On Tuesday, spokesman Andrew Melnykovych said agency attorneys were reviewing the ruling and that no decision had been made on whether to appeal.
Gary T. Crawford, ecoPower Generation’s chief executive officer, said the company was disappointed by the decision but remains committed to the project.
“Eastern Kentucky desperately needs jobs and our Hazard project would create over $80 million in new payrolls during construction alone, while permanently creating several hundred jobs in the region” and a sustainable energy source, Crawford said in a statement.
The PSC said the project would create 230 temporary construction jobs, then 30 permanent jobs at the plant and 225 in the logging and trucking industries.
Crawford said he did not know about the potential for the company to develop customers other than Kentucky Power.
Richard A. Sturgill, whose business interests include timber and coal, formed ecoPower Generation in 2009 to develop the plant, planned for an industrial park north of Hazard. The company says the plant would burn low-quality logs, waste limbs, wood chips and sawdust to make enough electricity for 30,000 homes.
It would be the only plant of its kind in Kentucky.
The legislature passed a bill in 2013 to benefit ecoPower Generation.
It required the PSC to consider not just whether the plant would be the cheapest source of power for a utility, but also factors such as jobs it would create.
Kentucky Power agreed to buy all the electricity from the plant. The power would be relatively expensive, but the utility cited benefits such as diversifying its electricity sources.
The PSC approved letting Kentucky Power recover the cost of $1.26 billion worth of electricity from the plant over 20 years.
An association of large electricity users sued, leading to the Court of Appeals decision.
The decision said the price for ecoPower Generation’s price to Kentucky Power was high, even for renewable energy; that the utility did not analyze whether the price of the electricity would be economical; and that there was no evidence the utility needed the power.
The decision said the PSC failed to balance the interests at issue, approving the deal between ecoPower and Kentucky Power on policy grounds without giving sufficient weight to the reasonableness of the costs.
The deal would create a handful of jobs, but subject nearly every household and business in 20 counties to a sizable rate increase for 20 years, the court said.
“All told, the citizens of these twenty counties in eastern Kentucky, many who live at or below the poverty line, are being asked to fork out over a billion dollars so that Kentucky Power can diversify its energy portfolio” in case the federal government someday makes utilities provide electricity from renewable sources, the court said. “In no way, shape or form can we accept that the General Assembly intended the citizens of this commonwealth to shoulder this type of burden.”