In May, Kentucky Power scrapped a plan to spend more than $900 million to install pollution controls, mainly a scrubber, on Unit 2, the largest of the two units at Big Sandy. The utility cited rising costs and the fact the project would have driven up electricity rates by about 31% for its 175,000 customers in eastern Kentucky.
Still to be determined is the fate of Unit 1, a 278-mw unit at Big Sandy. The company plans to issue a request for proposals in the first quarter of 2013 for up to 250 mw, possibly to replace Unit 1. Also under consideration is converting Unit 1 to burn natural gas.
“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,” said Greg Pauley, president and COO, Kentucky Power. “While it does represent an increase in customer’s rates of about 8%, it is substantially less than our previous filing and will save our customers millions of dollars while bringing us into environmental compliance.”
When the scrubber plan was withdrawn, Kentucky Power said it believed that new opportunities were emerging that would allow the utility to meet its obligations at a lower cost.
Among those options is the proposed purchase of 50% ownership in the 1,560-mw Mitchell coal plant near Moundsville, W.Va., from sister utility Ohio Power Co. Kentucky Power is asking the PSC for authority to recover about $530 million in costs related to the planned acquisition.
Kentucky Power wants to buy half of the output of Mitchell’s 770-mw Unit 1 and 790-mw Unit 2, for a total of 780 mw. Both Mitchell units are equipped with advanced environmental controls, including scrubbers to reduce sulfur dioxide emissions, and meet all current federal Environmental Protection Agency requirements. Ownership in the other half of Mitchell would be transferred to Appalachian Power Co., another AEP subsidiary.
Federal Energy Regulatory Commission approval also will be required for the transfer.
Pauley said Big Sandy will continue to run as it does today “for a couple more years,” and any of the plant’s roughly 120 employees affected by the planned changes will have the opportunity to pursue other job prospects with AEP and Kentucky Power.
In any event, Big Sandy Unit 2 will cease burning coal and be retired in 2015.