By Ronnie Ellis / CNHI News Service
Electrical ratepayers, local governments and those employed in the coal industry might have a hard time understanding the complicated transaction through which Kentucky Power Company is purchasing half the generating capacity of a coal-fired West Virginia plant.
What’s clear is the move changes the landscape in eastern Kentucky, perhaps costing 150 jobs at KPC’s Big Sandy Plant in Louisa; reducing coal usage by 2.5 tons annually which in turn affects other support jobs; and producing higher rates for KPC’s 175,000 customers in 20 eastern Kentucky counties.
The Kentucky Public Service Commission approved the $536 million transaction by which KPC will buy 800 megawatts of capacity from the Mitchell Plant in Moundsville, W. Va., owned by a sister company Ohio Power. Both companies are subsidiaries of American Electric Power, based in Columbus, Ohio.
The move was precipitated by a 2007 consent order the company signed with the federal government to reduce emissions at the Big Sandy Plant or close it by 2015. KPC says putting scrubbers on units at Big Sandy – which would allow it to continue burning coal – would have cost $980 million and, according to the company, would raised rates from 26 to 31 percent.
Shutting down the coal-fired units at Big Sandy and purchasing half the Moundsville Plant will cost KPC about $536 million which the company says will ultimately raise rates by 14 percent.
(Many in eastern Kentucky, including state Rep. Rocky Adkins, D-Sandy Hook, dispute those numbers. He says KPC could install scrubbers at Big Sandy for less than the company estimates without such dramatic rate increases.
Adkins is pushing a bill in the Kentucky General Assembly that would require the PSC to reconsider the case. KPC President Greg Pauley says the bill would not affect KPC’s transaction.)
As part of the settlement with outside groups that intervened in the case, KPC agreed to freeze base rates to customers through May 31, 2015, so the rate increases haven’t kicked in.
But the PSC also authorized the company to add a 5 percent surcharge to pay for the Mitchell Plant acquisition. But the surcharge won’t be added onto future rate increases – the surcharge is time-limited to about 17 months or roughly through the period of frozen rates.
The 14 percent figure is based on estimates by KPC. But the company will have to go back to the PSC for approval for any rate increase after May 2015 and the expiration of the 5 percent surcharge.
Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at firstname.lastname@example.org. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.