The Richmond Register

November 22, 2013

Kentucky Power seeks to withdraw rate increase request

By Ronnie Ellis
CNHI News Service

FRANKFORT — Kentucky Power is asking the state Public Service Commission to withdraw its June request for a base rate increase to recover costs associated with its purchase of half interest in a West Virginia power plant.

The request to withdraw the earlier request does not affect a separate PSC order that allows KPC to buy 50 percent interest in the Moundsville, W.Va., Mitchell Power Plant owned by Ohio Power, which, like KPC, is a subsidiary of American Electric Power. However that October ruling may be appealed in court.

Prior to PSC approval of the final Mitchell Plant agreement, KPC had requested a $114 million rate increase, which would have raised customer rates by about 23 percent.

But when the PSC approved a stipulated agreement worked out by KPC and two intervening groups — the Sierra Club and the Kentucky Industrial Utility Customers — to transfer the Mitchell assets to KPC on Oct. 14, the company agreed to withdraw the earlier request.

Under the final agreement, KPC will freeze current base rates until May 2015, but is allowed to recover part of the costs of acquiring the Mitchell assets through an Asset Transfer Rider applied to customers’ bills beginning in January.

That will increase the average residential customer’s monthly bill by about 5 percent, or around $6.70 more a month.

“Withdrawing this case is something we committed to do when we accepted the stipulated settlement agreement back in October,” said Ranie Wohnhas, managing director for regulatory and finance for KPC. “Now that all the commission-related appeals have been exhausted, the company filed its request to withdraw the base rate case on Nov. 19.”

Kentucky Attorney General Jack Conway had asked the PSC to reconsider its ruling in the Big Sandy case, but the PSC denied his request in an order it issued last week. Conway spokeswoman Allison Gardner Martin said an appeal “is likely.”

Under the October order from PSC, KPC will purchase half interest in the Mitchell Plant, which has emission control devices called scrubbers, and close two coal-fired units at Big Sandy, which don’t have the pollution controls.

The cost of the Mitchell transaction is $536 million and will eventually result in an estimated 14 percent rate increase for the roughly 173,000 KPC customers in 20 Eastern Kentucky counties. The company plans to convert one of the Big Sandy units to a gas-fired unit and close the other and the changes will allow the company to comply with a 2007 federal consent decree to reduce emissions at Big Sandy in Louisa or close the plant by 2015.

The alternative would have been to retrofit the Big Sandy Plant with scrubbers at a cost of $980 million, which would have resulted in rate increases between 26 and 32 percent.

But the change is expected to cost the area 150 direct jobs and Lawrence County $900 million in lost property taxes for county government and local schools. It also will impact the region’s coal economy because the plant burned about 2.5 million tons of coal annually.

The PSC must still approve the company’s plans to convert one of the Big Sandy’s coal-fired units to natural gas. Friday, the company said it expects to file such a request next month.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at Follow CNHI News Service stories on Twitter at cnhifrankfort.