Published : February 24, 2010
KEF ask feds to prevent co-op from borrowing
Berea-based group opposes coal-fired plant

*NOTE: Story says KEF which is incorrect, should say co-op rate payers .

By Bill Robinson
Senior News Writer

BEREA —  The Berea-based Kentucky Environmental Foundation on Tuesday petitioned the U.S. Dept. of Agriculture (USDA) inspector general to review the agency’s September 2009 decision to allow the East Kentucky Power Cooperative to take on up to $900 million in additional debt.

The non-profit Winchester-based utility supplies electricity to distribution co-ops in 87 counties, including Bluegrass Energy and Clark Energy that serves customers in Madison County. It is seeking permission from the state public service commission to borrow $921 million to build a new coal-fire generating plant on the Kentucky River in Clark County.

In 2008, the USDA stopped lending money to rural utilities to build coal- or nuclear-fired generating plants.

EKPC must receive approval from several environmental and financial regulators before it can begin construction, and KEF is opposing it at every turn.

At a public hearing Feb. 4 in Winchester, KEF members asked the state Division of Air Quality to deny an air-quality permit for the plant. The environmental group claims that EKPC could eliminate the need for additional electricity by making a comparable investment in conservation and alternative sources.

Any additional emissions of carbon dioxide, sulfur dioxide, mercury or other heavy metals should be denied, opponents of the permit said at the hearing. Although carbon dioxide emissions are not regulated, the gas recently was classified as a pollutant by the Environmental Protection Agency and pending legislation in Congress could impose costly restrictions on its release into the atmosphere, they said.

The new plant’s fluidized-bed combustion technology would release only 3 percent of the sulfur dioxide and 5 percent of the mercury that a conventional coal-fire plant would release, according to EKPC spokesperson Nick Comer. The technology does not reduce carbon dioxide emissions.

KEF’s petition to the USDA includes a statement by Steve Wilkins, an 18-year member of the Bluegrass Energy Co-op who lives in Madison County. He accused the Agriculture Department’s Rural Utility Service of giving its blessing to EKPC’s taking on more debt with “no evidence” that it “completed any substantial financial review of EKPC.”

According to Wilkins, “This is no different than banks making high-risk loans for home mortgages, and we all know what happened as a result of that.”

KEF claims the generating co-op, which already carries a debt of $2.3 billion, “is in dire financial condition.” Its debt-to-equity ratio is “far below” comparable co-ops, and “its own analysts say it is doubtful the cooperative could even reach an investment-grade credit rating,” KEF says.

KEF’s petition includes a nine-page opinion by New York-based consultant T.R. Rose that uses EKPC’s statements seeking rate increases as evidence of poor financial condition and lack of credit worthiness.

Even with rate increases requested in 2008, a financial consultant that EKPC had testify on its behalf said the utility would remain inadequately capitalized through 2011 because it will be spending to build generating facilities, the Rose report stated.

EKPC spokesperson Nick Comer said Tuesday the utility is not in poor financial heath, that in the past four years it had accumulated a surplus of $110 million which should generate a more favorable response from the private equity markets.

The utility’s conservation efforts in recent years have reduced demand by 180 megawatts, he said, almost as much as the 200 megawatts that the new power plant will produce.

Still, electricity demand in EKPC’s region is projected to rise by 200 megawatts, Comer said, and building a coal-fire generating plant is the most economical and reliable way to meet that demand.

Without the new plant, he said, EKPC will be forced to purchase more expensive electricity from other utilities.

Bill Robinson can be reached at brobinson@richmondregister.com or 624-6622.