Move may not delay power plant

By Mike Wynn

April 20, 2010

East Kentucky Power Cooperative may have signaled plans last week to re-evaluate financing for a proposed $819 million power plant in southern Clark County, but the move will not automatically stall the project.

Nick Comer, a spokesman for the cooperative, said Monday that East Kentucky Power is still awaiting two permits from the Army Corps of Engineers. Officials expect that process to continue for about a year.

“We believe it is going to be next spring before we have those in hand, so we are going to step back and reassess our needs for financing,” he said. “This doesn’t necessarily mean we are postponing the plant.”

The cooperative has sought private financing for the project since 2008, when the Rural Utilities Service issued a moratorium on loans for coal-fired plants. The Kentucky Public Service Commission (PSC) must approve the funding arrangement before a deal is finalized.

East Kentucky Power withdrew its request to the PSC for approval Thursday, but Comer said the project remains on schedule with permitting, and officials are only re-evaluating the financial aspects of the plant.

Once permits are complete, “we may be ready to go at that point,” he said.

Comer could not specify a formal timeline, but he said officials expect private funding to remain available, and East Kentucky Power’s recent financial woes did not factor into the decision. He also predicted future requests for rate adjustments to offset growing capital costs.

The cooperative’s fiscal order has come under question since 2004 when East Kentucky Power recorded a negative net margin of $27 million following an outage in Maysville that forced the cooperative to purchase power.

A $46 million negative net margin was again recorded in 2005 in response to a lawsuit from the federal Environmental Protection Agency, and mild weather conditions limited revenue in 2006.

The PSC has granted two rate hikes over the past three years, but it also ordered a management audit in 2008 amid pecuniary concerns. Results of the audit are scheduled for release on Thursday.

Following last week’s withdrawal, environmental groups long opposed to the plant immediately claimed a triumph.

The Sierra Club, the Kentuckians for the Commonwealth and the Kentucky Environmental Foundation have waged an intense two-year campaign in an effort to halt the project. The groups have cited the cooperative’s financial strains to bolster arguments against the plant, although opposition has mainly focused on the environmental and health impacts of burning coal.

In a joint press release Monday, the groups said the move will benefit public health, help keep rates low, and allow the cooperative to focus more on green energy sources.

“East Kentucky Power Cooperative’s delay of plans to build a coal-burning power plant in Clark County opens the door for the power provider to find cleaner sources of electricity, and in the process, create significant savings for its ratepayers,” Wallace McMullen from the Kentucky Sierra Club said in the release. “Coal is dirty, harmful, and full of hidden expenses, and East Kentucky Power Cooperative’s decision clearly shows that coal is a huge financial risk.”

Still, Comer said, criticism from environmental groups did not influence the action.

East Kentucky Power has aimed to build the 278-megawatt generating unit for years at J.K. Smith Station in Trapp.

Earlier last week, the Kentucky Division of Air Quality approved a crucial air permit for the plant and forwarded the permit to EPA officials for final approval. The EPA has a 45-day period to consider the permit.

In the meantime, Comer said, the cooperative’s generating capacity has fallen short of demand by about 200 megawatts.

“What that means is, we are out on the market purchasing electricity,” he said. “It is available and typically costs more … but we believe that it will continue to be available.”

Contact Mike Wynn at mwynn@winchestersun.com.