LOUISA — After scrapping plans earlier this year to install a $1 billion scrubber at its Big Sandy Power Plant to comply with environmental standards, Kentucky Power announced Wednesday its intention to close the primary generating unit at the facility and replace it with power generated in Moundsville, W.Va.
If approved, the plan would cause consumer electric bills to rise 8 percent.
Kentucky Power is under a federal consent decree to bring the Big Sandy plant into compliance with the Clean Air Act by the end of 2015, or else close the facility. The utility’s initial plan called for the construction of a $1 billion scrubber at the Big Sandy plant to clean environmental emissions, which would have caused electric bills to soar 31 percent.
That plan was later withdrawn at the last minute, as the state Public Service Commission considered whether or not to approve it. At the time, Kentucky Power said it wanted to “reevaluate alternatives” due to changes in the energy market.
Under the plan announced Wednesday, Kentucky Power would obtain 50 percent of the Mitchell Generation Station, in Moundsville, W.Va., which is currently owned by AEP-Ohio. The cost of the transfer would be $530 million, which, when combined with savings from terminating a power inter-connection agreement, would result in the 8 percent bump in electric bills.
The transfer of half the Moundsville plant to Kentucky Power will give the utility 780 megawatts of generation, compared to the 800 megawatts currently produced by the Unit 2 generator, which will be shut down down if the plan is approved.
“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,” Greg Pauley, president and chief operating officer of Kentucky, said in a statement Wednesday. “While it does represent an increase in customers’ rates of about 8 percent, it is substantially less than our previous filing and will save our customers millions of dollars, while bringing us into environmental compliance.”
Wednesday’s filing does not address what will happen to the smaller and older 276-megawatt Unit 1 generator at Big Sandy, and a statement released by Kentucky Power notes that the company is still trying to decide what to do with it. The statement notes that those plans could become clear next year, when Kentucky Power submits another filing to cover future generating capacity at Big Sandy.
Options on the table for the Unit 1 generator could include converting it to natural gas or replacing its generation. The generator will, however, cease burning coal, as plans to retire it as a coal-fired generator in 2015 are already in place.
If approved, Kentucky Power’s plan will have an affect on jobs, both at the plant and elsewhere. Kentucky Power spokesman Ronn Robinson said many of the employees who would be displaced by the closure will be given an opportunity to work elsewhere in the AEP system. Those who do not obtain other work with AEP or elsewhere will be offered a severance package.
The closure will also have a negative ripple-effect in the coal industry. The Big Sandy plant currently consumes 2 million tons of coal a year to produce electricity, which will drop to zero when the plant stops burning coal.
During a hearing earlier this year about plans for the now-scrapped scrubber, Pike County Judge-Executive Wayne T. Rutherford said the plant is directly responsible for 500 coal jobs in the region. Those jobs now appear in jeopardy.
If approved, the plan would not take effect until 2015, and the Big Sandy plant will continue to operate as normal until that time, Robinson said.