KY Power secures settlement to reinvest in aging W.Va. coal plant as energy bills rise
Kentucky Power is reprising its application for state approval of long-term investment in a 54-year-old West Virginia coal-fired power plant that could add to growing concern over increasingly high energy bills in Kentucky’s easternmost counties.
The Ashland-based company that serves about 165,000 customers in 20 Eastern Kentucky counties has reached a settlement with an organization representing the state’s largest industrial customers that would spread out the $138 million cost of preserving the company’s stake in Mitchell Power Plant beyond 2028. An environmental group that has intervened in the request insists converting the plant to natural gas would keep long-term costs down for ratepayers.
At the same time the company seeks permission to invest fully in the aging plant, Kentucky Power wants the PSC’s blessing to hike residential rates by nearly 15% to help recover upgraded infrastructure costs and make up for increasingly fewer residential and industrial customers in the state’s mountainous coalfield region.
Combined with a bond purchase surcharge that hit bills in July to convert the company’s other power plant to natural gas, Eastern Kentucky ratepayers could be facing a 22% increase in power costs by this time next year — an extra $40 on the average residential bill and well above the state and national average.
“These are very challenging questions for this company,” Angie Hatton, chair of the Kentucky PSC, said during a hearing Tuesday in Frankfort. “While we look for a better solution to be able to tell [customers], we’re going to spend potentially here 138 million more ratepayer dollars to invest in a 54-year-old coal plant that doesn’t burn Kentucky coal, or employ Kentucky people or pay Kentucky property tax.”
But a string of Kentucky Power officials who testified Tuesday said their analyses indicate long-term investment in the 1,560 megawatt-producing plant the company co-owns with West Virginia-based Wheeling Power is in the best interest of its customers. The company needs the market flexibility the coal-fired plant offers, they said.
Most of the money Kentucky Power says it would spend under the Nov. 14 agreement with Kentucky Industrial Utility Customers would fund projects the PSC already blocked in 2021. Tougher U.S. Environmental Protection Agency standards on polluted wastewater means the plant’s spent coal ash ponds need major renovations.
The 2021 Kentucky PSC order requires the company to terminate its interest in the plant by Dec. 31, 2028. The commission said the company failed to provide evidence the environmental projects were necessary, reasonable and cost-effective.
Then-Attorney General Daniel Cameron, who intervened in the capital investment request, urged the company to retire the West Virginia plant, partly because it did little to boost the Kentucky economy. Current Attorney General Russel Coleman’s office has indicated its support for the new settlement that would preserve Mitchell, although it has not formally signed on.
Although the PSC order from 2021 remains in place, Kentucky Power’s latest request is essentially a redo, as officials are coming before commissioners armed with information they say makes it clear that Mitchell is their best bet.
Kentucky Power wants the PSC’s permission to repay West Virginia ratepayers $20.1 million for the company’s share of the environmental costs Wheeling Power has already covered and $57.8 million for half of the remaining pollution control project costs. The remaining $60.4 million represents the difference in capital between the plant’s two co-owners since the PSC denied Kentucky Power’s 2021 request. Officials said they are not yet seeking to recover those dollars.
“We are asking to make the investments necessary to keep bills as low as we possibly can,” said Tanner Wolffram, Kentucky Power director of regulatory services. “That is what the Mitchell plant allows us to do. Otherwise, we will be subject to the conditions within the market, and it would be very challenging for us. Again, we’ve evaluated and overturned every stone that we can in terms of generation options ... and every time it just came back to Mitchell as the right thing to do for customers.”
If the company is forced to take an alternative approach, its remaining investment in the plant would be a burden without a benefit on customers, company spokesperson Sarah Nusbaum wrote in an email to the Herald-Leader.
“Essentially, customers would carry the cost of the existing plant without receiving the full capacity and energy benefits it still provides,” Nusbaum said. “Much like trading in a vehicle, you remain responsible for the outstanding balance on the current one.”
The Sierra Club has called for the plant to be converted to natural gas, much like Kentucky Power’s Big Sandy Power Plant did in 2016. Repairs to one of Mitchell’s concrete cooling towers represent even more strain on the company’s future costs. In recent PSC filings, the environmental organization has highlighted the plant’s 25% capacity factor, barely more than half of the regional average.
Kentucky Power has announced its intent to apply for a U.S. Department of Energy grant to help cover the costs, part of a $625 million investment President Donald Trump’s administration unveiled in September to prop up the nation’s coal industry.
An expert witness for the Sierra Club said in case filings the company would avoid the need to invest in repairing or replacing the cooling tower if it converted to natural gas, a point which Kentucky Power is refuting. Sarah Glick, a principal at Synapse Energy Economics, also accused the company of failing to consider all alternatives, including entering into short-term power purchase agreements with Wheeling Power.
“Kentucky Power’s analysis does not support its original claim that continuation of its 50% share of Mitchell beyond the required termination date of Dec. 31, 2028, is the least-cost option for the company, regardless of environmental compliance options,” Glick said in written testimony filed before the commission earlier this month.
Kentucky Power’s proposed 14.9% rate increase has already generated outrage among many Eastern Kentucky customers who say they’re struggling to keep the lights on and keep warm during the winter. Nearly 100 public comments have already been filed on the proposal.
The utility has customers in Boyd, Breathitt, Carter, Clay, Elliott, Floyd, Greenup, Johnson, Knott, Lawrence, Leslie, Letcher, Lewis, Magoffin, Martin, Morgan, Owsley, Perry, Pike and Rowan counties.
The Kentucky PSC and attorney general’s office filed a Federal Energy Regulatory Commission complaint against Kentucky Power’s parent company, American Electric Power, earlier this year claiming the utility has unfairly charged Eastern Kentucky customers for the costs of projects in other states. Commissioners denied that complaint Nov. 7, ruling that a limited selection of unequal transmission improvement projects the PSC and attorney general pointed to is not enough to overturn a utility’s overarching plan for allocating resources.
Kentucky PSC public comment sessions
The Kentucky PSC is set to host three public comment hearings over proposed rate increases:
- 5 p.m. Thursday, Nov. 19 on the second floor of the Pike County Public Library, 126 Lee Ave., Pikeville
- 5 p.m. Thursday, Dec. 18 on the second floor of the Perry County Courthouse, 481 Main St., Hazard
- 5 p.m. Thursday, Jan. 8 at the Ashland Transportation Center, 99 15th St., Ashland
