Customers of Kentucky Power Company can expect to see their monthly bills increase if a plan filed with the Kentucky Public Service Commission is approved, but not nearly as much as with a previous plan, the company said in a statement on Wednesday.
Kentucky Power filed the plan this week meant to address environmental compliance at its Big Sandy Power Plant near Louisa. The company had initially planned to install a scrubber system to reduce emissions at the aging coal-fired plant, which officials estimated would have resulted in a 31 percent increase in monthly bills.
The company’s new plan, which seeks approval to recover approximately $530 million in costs associated with transferring 50 percent of the ownership of the Mitchell Generation Station, currently owned by AEP Ohio, an American Electric Power subsidiary, to Kentucky Power. The company expects to replace nearly all of the electrical generation from the 800-megawatt Unit 2 at the Big Sandy Plant, which is scheduled to be retired in 2015.
The Mitchell Plant, near Moundsville, W. Va., is equipped with what the company calls “advanced environmental controls” that will meet federal EPA standards.
The company says Wednesday’s filing will result in an estimated 8 percent increase on customers’ bills, which translates to a $6 increase for customers using 1,000 kilowatt hours per month. Currently, those customers pay about $94 per month, and after the increase would pay approximately $100 per month, the company says. If approved however, customers would not see the rate increase reflected in their bills until 2014 at the earliest.
“At this time, and after much study and evaluation, we think this filing represents the best path forward for the company to meet both its environmental and customer obligations,” said Greg Pauley, president and chief operating officer of Kentucky Power. “While it does represent an increase in customer’s rates of about eight percent, it is substantially less than our previous filing and will save our customers millions of dollars while bringing us into environmental compliance.”
“When we withdrew our scrubber filing last summer, we stated that we felt new opportunities were emerging that would allow us to meet our obligations at a lower cost. The possibility of transferring these Mitchell Units was among those opportunities and doing so will allow us to reduce the impact on customers’ bills,” Pauley said.
The Big Sandy plant’s Unit 2 will be retired in the next two years, and the company reported that the future of the plant’s other smaller and older unit, which generates 278 megawatts, has yet to be decided. A filing to cover the future generating capacity of that unit will be submitted to the Kentucky Public Service Commission sometime in 2013.
In the meantime, the company plans to issue a Request for Proposals (RFP) early next year to potentially replace the generation from the Unit. The proposals will be evaluated along with the possibility of converting Unit 1 to natural gas combustion. Unit 1 is scheduled to be retired as a coal-fired generator in 2015.
“In the coming months, we will determine a plan to address the remaining generating unit at Big Sandy Plant,” Pauley said. “We will perform our due diligence to determine an affordable plan that balances the needs of our customers, shareholders and the environment. When we reach that decision, we will announce it publicly. Until then, we appreciate our customers’ and employees’ continued patience as we evaluate and determine the best means to address the future of Big Sandy,” Pauley said.
“Although the plant will continue to run as it does today for a couple more years, any employee affected by today’s announcement will have the opportunity to pursue other job prospects with AEP and Kentucky Power,” Pauley said.
Another component of the filing seeks approval to defer approximately $30 million dollars associated with study and engineering work involving this and other environmental filings concerning Big Sandy Plant.