Attorney General Conway says appeal likely

Last updated: November 21. 2013 2:37PM - 475 Views
Cris Ritchie — Editor

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HAZARD – The Public Service Commission denied a request last week for a new hearing in the case involving Kentucky Power Company’s plans to replace 800 megawatts of generating capacity when the company shutters one of its two coal-fired units in 2015.

Kentucky Attorney General Jack Conway opposed the company’s proposal to purchase a 50 percent stake in the Mitchell power plant in Moundsville, West Virginia, citing a resulting rate increase to the company’s ratepayers and also the negative affect closing the unit in Lawrence County will have on the regional economy. The PSC approved the proposal last month, however, while Conway’s office filed a request on Oct. 30 for a new hearing in the case.

Conway said he received the PSC’s denial of a new hearing on Friday, but added he will likely file an appeal in Franklin Circuit Court within the next 20 days.

“We think it’s really a double or triple whammy for ratepayers,” Conway told the Herald this week. “They’re looking at a significant (rate) increase in order to do this. Secondly, they (ratepayers) have to pay for half the Mitchell plant, and thirdly you lose the jobs and economic activity in coal mining associated with supplying the Big Sandy plant.”

The coal-fired Mitchell plant will generate 780 megawatts of power to replace the capacity currently being generated in Lawrence County. The cost of purchasing the plant will result in an initial 5 percent rate increase (or $6.70 for every 1,374 kilowatts hours used) for the company’s 173,000 customers in Eastern Kentucky, according to a company press release issued last month. An additional 9 percent increase will be spread out over the next few years for a total of 14 percent.

Conway said it appears the PSC deviated from its normal procedures when evaluating the transfer of the Mitchell plant by not requiring Kentucky Power to obtain independent information on potential lowest-cost alternatives to the plant in West Virginia, including the cost of retrofitting the Big Sandy plant to comply with federal air pollution regulations. The company had previously said the retrofit would cost approximately $1 billion and pulled plans to upgrade the plant’s pollution controls.

“In this particular case they just took some internal modeling from Kentucky Power and said OK, this looks like it’s the lowest cost alternative,” Conway said. “There’s no independence to it really, no RFP (request for proposals) from separate bidders. There was really no independent analysis of the true cost of retrofitting Big Sandy.”

The Public Service Commission did hire an independent consultant and is itself is an independent entity, conducting an “exhaustive” analysis of the evidence presented during the case, noted PSC spokesperson Andrew Melnykovych.

“To suggest that the commission just somehow took the evidence in the case and somehow swallowed it whole as submitted by Kentucky Power is, I think, doing a disservice to the work that the commission did,” he said.

The PSC also gave careful consideration to Conway’s request for a new hearing, Melnykovych added, but none of the issues raised in his request justified a new hearing in the case.

“I think the amount of analysis that was conducted in not just this particular case, but in the related case preceding it, was exhaustive in terms of looking at all of the various options available to Kentucky Power Company and determining how to best provide adequate generating capacity to its customers,” Melnykovych said.

Conway said if he opts to appeal the PSC’s decision, it could take several months before the appeals process is complete.

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