PSC to reconsider need for power plant

From staff and wire reports

June 25, 2010

The Kentucky Public Service Commission will reconsider the need for a new coal-fired power plant that East Kentucky Power Cooperative wants to build in southern Clark County despite opposition from environmental groups.

The commission opened an investigation into the 278-megawatt plant earlier this week, some five years after the regulatory agency granted initial approval for its construction.

Commission spokesman Andrew Melnykovych said in a news release Thursday that justification for the power plant was based on it serving an additional 60,000 customers of the Warren Rural Electric Cooperative. But in 2006 the cooperative opted to purchase power from the Tennessee Valley Authority.

The hearing later this year will address whether a new plant is “the least-costly option for meeting new demand, and what impact building Smith 1 would have on EKPC’s rates and financial condition.”

The PSC also pointed out that its jurisdiction is limited to rates and services, so the investigation will not address environmental issues associated with the project.

East Kentucky Power Cooperative has sought to build the plant at its J.K. Smith Station in Trapp for years. The project is expected to cost about $819 million.

Since 2008, environmental groups have organized an intense oppositional campaign, arguing that burning coal will harm the environment and pose risks to public health. Representatives from East Kentucky Power have countered, saying the plant provides the most affordable and reliable solution to meet growing demand for energy.

Still, East Kentucky Power withdrew a request with the PSC in April, seeking approval of debt for the project.

A week later, the PSC released a highly critical audit that admonished the cooperative’s management for ballooning debt and a deteriorating financial state. Auditors said the conditions resulted from years of top-level mismanagement that sought low rates at the peril of organizational health.

East Kentucky Power Cooperative filed a request with the Public Service Commission last month for a 5.3 percent increase in wholesale rates, arguing that the increase would help improve the cooperative’s finances.

Leaders at East Kentucky also pledged in a meeting last week to forge ahead in a new direction that addresses issues identified in the audit.