Coal proposal leads to debate
KY. POWER CITES LOWER COST IN DECISION TO RETROFIT PLANT RATHER
THAN SWITCH TO NATURAL GAS
By Scott Sloan ssloan@herald-leader.com H-L March 28, 2012
Kentucky Power’s request for state permission to retrofit its aging coal plant, which is the
subject of upcoming public hearings, has surprised some in the industry and led to a tense debate
before the state Public Service Commission.
Last year, the utility’s parent company, American Electric Power, said the burden of meeting
new federal pollution standards probably would cause it to retire many of its coal-fired power
plants, including Kentucky Power’s Big Sandy plant, in favor of other options such as natural
gas-fired power generation.
But since then, Kentucky Power has done an about-face in favor of coal, which historically has
signified its service territory of more than 170,000 homes and businesses in all or parts of 20
Eastern Kentucky counties. The company has proposed installing a scrubber to meet the more
stringent EPA standards. It says the coal-fired plant would remain cheaper than natural gas.
Kentucky Utilities took the opposite approach and was approved by the PSC to proceed with
retiring three of its coal plants in favor of natural gas electric generation.
Kentucky Power spokesman Ronn Robinson said that while the utility initially thought it
would retire its Big Sandy plant, which dates to the 1960s, “our analysis and summary showed
sticking with coal and adding a scrubber would be best for our customers.”
Environmental objections
But that analysis has come under fire in the case before the PSC. Others involved in the case,
including environmental groups and industrial customers, claim Kentucky Power underestimated
the cost of coal and overestimated the cost of natural gas.
“These big electric utilities make what seem to us to be rather irrational deci sions about
wanting to keep operating ancient coal-fired equipment that’s outdated and clearly going to be
slated for retirement in not too many years even if they do get pollution controls,” said Wallace
McMullen, chairman of the energy committee of the Cumberland chapter of the Sierra Club.
“There are health problems for people who suffer from the pollution. It’s a much better solution
for everybody to go with more energy efficiency efforts.”
Some local utilities have argued that while reducing demand for power through energy
efficiency is an admirable goal, it can’t be done quickly enough to replace what’s called baseload
generation that provides constant electricity for Kentuckians.
“Natural gas generation is a lot cleaner burning if they feel they need generation capacity and
can’t ramp up their efficiency efforts fast enough,” McMullen said. “Natural gas generation
seems like an option that’s much better than spending … on the coal-fired plant.”
Does it cost less?
The plant in question is Kentucky Power’s only one in the state. The Big Sandy plant sits north
of Louisa and has two units totaling 1,078 megawatts. Robinson said Kentucky Power’s
proposal is to retrofit the second unit, which is 800 megawatts, with the scrubber and retire the
smaller and older 278-megawatt unit.
Kentucky Power has asked the PSC to approve the project and allow it to recoup $940 million
in costs through the environmental surcharge on customers’ monthly bills. If approved, the
proposal would raise the typical residential customer’s electric monthly bill by about $31, or 30
percent, beginning in 2016, according to the PSC.
The issue for the PSC in Kentucky Power’s case is whether the retrofit is the least-cost option.
While the PSC’s role in environmental surcharge cases is more limited than in regular rate cases,
it does have the power to reject plans it deems are not the least expensive.
KU chose differently
In contrast to Kentucky Power’s plan, Kentucky Utilities was approved in December to spend
$896 million and retire three of its coal plants while retrofitting its remaining coal-fired Ghent
and E.W. Brown power plants to meet EPA standards. The amount of coal-fired generation being
retired totals 801 megawatts, which KU has proposed replacing with 1,135 megawatts of
natural gas-produced power that is estimated to cost $800 million.
Of the three power plants being retired, two did not have scrubbers and the third had a scrubber
that would have needed to be replaced, said KU spokeswoman Chris Whelan.
“When we did our analysis, doing the retrofits on those three plants was going to be more
expensive” than the natural gas option, she said.
The PSC agreed on the company’s plan to retire the coal-fired units rather than retrofit them,
while the request to build the natural gas fired plants remains under consideration.
Robinson of Kentucky Power said the utilities are sufficiently different that it’s irresponsible to
compare KU’s preference for natural gas plants to what works for Kentucky Power.
Does the PSC accept or reject?
In the case of Kentucky Power, a rejection by the PSC would be the first for a major
environmental surcharge plan. The last time a utility was not allowed to pursue a large
construction project was during the late 1980s when Louisville Gas & Electric was told it could
not build a second unit at a plant because it was deemed to be unnecessary, said PSC spokesman
Andrew Melnykovych. The unit was built about 20 years later. That case, though, was about
generating capacity and not environmental upgrades.
Kentucky Power’s Robin-son defended the company’s proposal, saying it was based on “the
data we have.”
“Gas prices, like anything, can change over time,” he said. “Gas might be something today,
and it might not be the same price tomorrow.”
Asked whether Kentucky Power favored coal because of its historical significance in its service
territory, Robin-son said the “overriding factor” was to present the least-cost option.
“That said, keeping coal there will lead to other benefits,” he said. “We will be able to retain
jobs and help the local economy.
“But we looked at it from the least-cost option.”
Scott Sloan: (859) 231-1447. Twitter: @HeraldLeaderBiz.
Public meetings
The state Public Service Commission is holding public meetings to take input about Kentucky
Power’s plan to retrofit its Big Sandy coal-fired power plant.
Each meeting will begin with a one-hour information session about these types of
environmental cases followed by periods of public comment.
Here is the schedule of meetings:
Louisa: 12:30 p.m. April 4, Lawrence County Community Center, 205 Bulldog Lane.
Pikeville: 5:30 p.m. April 4, Pikeville High School auditorium, 120 Championship Drive.
Whitesburg: 12:30 p.m. April 5, Letcher County High School auditorium, 435 Cougar Drive.
Hazard: 5:30 p.m. April 5, Perry Central High School auditorium, 305 Park Drive.
COURTESY OF KENTUCKY POWER Kentucky Power’s Big Sandy coal-fired plant is the
only power generator it has in the state.
EPA acts to curb emissions from new power plants
HISTORIC PROPOSAL ON GREENHOUSE GASES COULD MAKE COAL TOO COSTLY
GOING FORWARD
By Renee Schoof
McClatchy Newspapers (H-L March 28, 2012)
WASHINGTON — The U.S. Environmental Protection Agency took a historic step on
Tuesday in the fight against climate change, proposing the first limits of greenhouse-gas
emissions from new power plants.
The new rule probably would make new coal-fired power plants too expensive after this year.
It wouldn’t apply to some 15 power plants that are expected to break ground in the next 12
months. After that, however, coal-fired plants would have to capture and store some of their
carbon dioxide emissions, a practice that’s so costly it isn’t in commercial use anywhere.
Natural gas plants belch only about half the emissions of coal plants and would not need any
additional equipment to meet the new standard. The nation’s utilities have been moving toward
natural gas to fuel new plants anyway because the use of hydraulic fracturing has greatly
expanded the nation’s gas supply and reduced prices.
This is the first time that the United States has ever proposed any limits on greenhouse gases
from industrial sources. Republicans in Congress and their business allies promised to fight the
EPA rule, calling it hostile to abundant coal and too costly. Environmentalists and health groups
cheered it.
The standard will have limited impact, however, because it won’t apply to existing power
plants, the biggest industrial source of greenhouse gases.
EPA Administrator Lisa Jackson said the agency has no plans to address emissions from
existing plants. U.S. power plants produced 2.3 billion metric tons of carbon dioxide in 2010,
about one-third of the nation’s total emissions.
Coal now generates 45 percent of electricity. The department expects it will still provide 29
percent in 2035.
Republicans, including Kentucky Rep. Ed Whitfield, who is chairman of the House
subcommittee on energy and power, brushed away Jack-son’s assurances.
“President Obama and EPA Administrator Lisa Jackson are circumventing the will of Congress
and the American people by moving forward with a regulation that threatens our most abundant,
reliable and affordable domestic electricity source — coal,” Whitfield said.