Service commission holds meeting on proposed rate hike
by Bailey Richards
HAZARD —Local residents were given an opportunity to comment on a rate hike proposed by Kentucky Power Company at a meeting hosted by the Kentucky Public Service Commission in Hazard. The proposed increase, the company says, will be necessary for the installation of a new pollution control device, or scrubber, mandated by the Environmental Protection Agency.
The meeting, held on April 5, at Perry Central High School, was split into two parts, one with speakers from the PSC that explained the reasons behind the possible increase and the need for the scrubber, and the other a question-and-answer session open to the public.
Andrew Melnykovych, communications director for the Public Service Commission, said that the commission has until June to make a decision. Kentucky Power, a subsidiary of American Electric Power, will have to install the scrubber on their Big Sandy Plant near Louisa in order to comply with new EPA regulations on emissions from coal-fired power plants. The scrubber will cost nearly $1 billion to install. Before Kentucky Power can install the device, they need to be granted permission from the Public Service Commission following a series of meetings and statements.
“Basically we are trying to give people a sense of the process that the PSC is going through here, and what the legal requirements are that we have to abide by,” Melnykovych explained.
All of the statements made by the public will be included in the file and taken into consideration by the commission. However, Melnykovych said that the commission is not able to base their decision on the economic status of the customers.
“We have to consider it on the basis of what is in the statute, and the statute grants them full recovery of those costs,” said Melnykovych. “That is not to say that the PSC is not aware of those economic factors and isn’t sensitive to those economic factors.”
While the law says that the entire cost of the scrubber can be recovered through raising rates, it also protects the company and the investors from having to bear the full burden any of these costs. Melnykovych said that that does not mean, however, that the commission will not consider granting the lowest possible rate of recovery to help reduce the amount of strain on customers.
The commission has until June to make a determination, and even then the rate will not increase until the scrubber is up and fully operational in 2016.
“The increase wouldn’t take effect until 2016, because in cases like this, if a utility is going to construct something they can’t start recovering the cost of it until it is actually in use,” he said.
In the event of Kentucky Power being denied the permission to raise rates and build the scrubber, they could consider closing the plant since few other options for coming into compliance with the regulation exist. If the plant is closed, Kentucky Power would then be responsible for finding an alternative power source for its current customers.
While some of the public did express concern about the possible rate increase, many of them asked questions about what the scrubber does, and why it would affect their rate. Perry County Clerk Haven King said that he was in support of helping the Big Sandy Plant stay in operation since it means more jobs for the region, especially coal jobs.
“I support this issue with what AEP/ Kentucky Power wants to do, because right now we have lost 2,000 jobs from right here that pay $75,000 a year,” said King.
However, he did say that with the constant rate increases and strict regulation on coal-fired plants, he sees a future in alternative energies in the United States and a future for coal overseas.
“I am for wind. I am for hydro. I am not for nuclear because I don’t want to have another Japan,” King added. “I still think that coal has a future, but I don’t think it is going to be for the U.S. But I do think it is going to be overseas.”
The commission’s decision will be released in June. If the application to build the scrubber and increase the rate is granted, construction could begin shortly after that on the Big Sandy Plant.
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