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October 15, 2013

PSC says Kentucky Power decision ‘puts closure on case’

FRANKFORT — Kentucky Power Company has accepted the stipulations in a Public Service Commission order that allows the company to purchase half-interest in a West Virginia generating plant and close down its coal-fired Big Sandy facility in Lawrence County.

Ranie Wohnhas, KPC managing director for regulatory and finance, announced the company’s decision on Monday.

Under the PSC order, KPC will purchase half-interest in the Mitchell Power Plant located in Moundsville, W.Va., from Ohio Power Company. Both KPC and Ohio Power are subsidiary companies of American Electric Power.

Wohnhas said the transfer should be complete by Dec. 31 of this year. The 780 MW generated at Moundsville will substantially replace 800 MW now produced by the Big Sandy Power Plant Unit 2 which will be retired in 2015.

KPC signed a federal consent agreement in 2007 to substantially reduce carbon emissions at the Big Sandy facility by 2015.

Initially, the company proposed installing scrubbers at the plant at a cost of $980 million which would have raised rates by as much as 26 percent. The company subsequently withdrew that proposal, substituting one to buy 50 percent of the Mitchell Power Plant at a cost of $536 million. Eventually, the purchase is expected to lead to a 14 percent increase in customer rates.

The Sierra Club, the Kentucky Industrial Utility Customers (KIUC) and the Office of the Attorney General, intervened in the case but the Sierra Club and KIUC agreed to the proposal with stipulations to freeze base rates until May 2015 and to provide economic development funding for the region.

While base rates will remain the same until May 2015, the order allows KPC to recover some of the Mitchell-related costs. Wohnhas said an average residential customer using 1,374 kilowatt hours of electricity a month will see a net increase of approximately 5 percent or about $6.70 a month beginning next January.

As part of the agreement with The Sierra Club and KIUC, KPC will seek PSC approval to convert Big Sandy Unit 1 to natural gas instead of coal, which would allow Big Sandy to stop burning coal in 2015.

The agreement was opposed by Lawrence County officials and state Rep. Rocky Adkins, D-Catlettsburg, who say it will cost the county and county school system more than $900,000 a year in property taxes and lead to the loss of 150 jobs at the plant. They also say it represents another severe blow to the region’s coal economy because Big Sandy currently burns about 2.5 million tons of coal each year.

Andrew Melnykovich, spokesman for the PSC, said KPC’s agreement “puts closure on the case” — at least from the PSC’s perspective. Since the Office of Attorney General Jack Conway intervened in the case and declined to sign onto the stipulated agreement with KIUC and The Sierra Club, that office could ask the PSC to reconsider or challenge the ruling in court.

A spokeswoman for Conway’s office said no decision has been made regarding an appeal but the OAG continues to have concerns about the agreement.

“We are still in the process of analyzing the 80-page opinion and weighing our options to seek rehearing and or appeal,” Allison Martin said. “Procedurally, KPC’s acceptance of the additional requirements of the PSC order does not address the concerns we had with the settlement, and so, as our duty requires, we are evaluating all legal options to protect consumers from current or future rate increases not adequately justified under the law.”

The OAG, which represents consumers in PSC rate cases, has said the company did not consider other lower-cost options such as purchasing power on the open market.

Ronnie Ellis writes for CNHI News Service and is based in Frankfort. Reach him at rellis@cnhi.com. Follow CNHI News Service stories on Twitter at www.twitter.com/cnhifrankfort.

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