A week after receiving the modified settlement agreement from the Kentucky Public Service Commission (PSC), Kentucky Power has accepted the agreement on Monday and has been authorized to purchase a 50 percent interest in the Mitchell Power Plant, effectively sealing the fate of the Big Sandy Power Plant’s Unit 2.
Since its announcement of the possible shutdown of the Big Sandy Coal-Fired Power Plant Unit 2, Kentucky Power has been researching alternatives to replace the 800 megawatts (MW) the unit produces, even considering a nearly $1 billion upgrade of the existing system to meet the Environmental Protection Agency’s (EPA) carbon-emission guidelines.
In a press release, Greg Pauley, president and chief operating officer of Kentucky Power, said he and those at the company think this agreement is the right move for Kentucky Power.
“We are is (sic) pleased that the Kentucky Public Service Commission approved the transfer of the Mitchell generation and agreed that this is the most cost-effective way to meet federal environmental rules and continue providing reliable, affordable electricity to all our customers,” Pauley said.
Due to the cost of purchasing Mitchell, which will generate 780 MW of power, Kentucky Power will implement a rate increase of approximately 5 percent to its 173,000 customers in Eastern Kentucky, starting on Jan. 1, 2014. According to the press release, this means that a residential customer using 1,374 kilowatt hours of electricity per month will see an increase of $6.70 per month.
The Herald reported earlier this month that customers will feel an additional 9 percent increase in relation to the purchase spread out over the next few years, bringing the total eventual increase to 14 percent.
The Big Sandy Unit 2 is scheduled to be retired in 2015, and though many local leaders and representatives have warned of the devastating economic impact the shutdown will have on Lawrence County, where the plant is located, and the surrounding counties, the agreement includes provisions for these effects. Economic development and job training support for the affected areas totaling $233,000 per year for five years will be supplied by Kentucky Power. The company will also be required to increase its Home Energy Assistance Program (HEAP) contributions by 20 percent, and will increase the amount it spends on energy efficiency programs by $3 million over the next three years.
Alice Howell, chair of the Cumberland chapter of the Sierra Club, which was a partner in the agreement, released a statement about the agreement this week.
“We applaud Kentucky Power’s commitment to invest more than $1.1 million towards economic development in low-income communities in Lawrence County, Ky., and surrounding counties,” she said. “Thankfully, at least one third of that money must be used for job training, with a focus on weatherization and energy efficiency training.”
Howell added that the agreement includes a commitment from the company to increase energy over the next five years. The agreement also requires Kentucky Power to request 100 MW of wind power in its upcoming integrated resource planning (IRP) process, which essentially plans where electricity will be generated and where the company will buy electricity.
“We continue to look for ways to work with the governor and local leaders to support clean energy investments and economic diversification in Eastern Kentucky,” Howell said.