Most of the upgrades are planned for the 2,225-megawatt Ghent and 1,717-megawatt Mill Creek plants as well as 547-megawatt Unit 1 at the Trimble County plant. Earlier this year, a second, 750-megawatt unit went into operation at Trimble County, located along the Ohio River about 50 miles northeast of Louisville.

LG&E and KU, owned by Pennsylvania’s PPL Corp., evaluated options for months before concluding the least-cost alternative is to add enhanced pollution controls to comply with a slew of new and proposed U.S. Environmental Protection Agency rules over the next several years. For ratepayers, the decision will not be cheap. LG&E expects average electric bills to increase by more than 19% and KU by more than 12% by 2016.

But the improvements will help retain hundreds of jobs and provide a continued outlet for Kentucky coal.

The settlement sent to the Kentucky Public Service Commission was signed by all the parties in the case, including Attorney General Jack Conway, a Democrat who won re-election to a second, four-year term in November; the Sierra Club; Natural Resources Defense Council; and other groups representing low-income and industrial customers.

If the commission agrees with the deal, LG&E and KU “can go forward with our environmental cost recovery,” said company spokeswoman Chris Whelan.

Initially, LG&E and KU also want to install more controls on Units 1 and 2 at the 1,720-megawatt E.W. Brown power plant to capture particulates, a project estimated to cost $225 million. But the utilities agreed to defer that project at the request of the environmental groups.

“It’s a give and take and that’s one of the things the environmental groups wanted,” Whelan said. “We have no plans to abandon coal and we think those units are viable. All they need are retrofits.”

The Brown project delay, she added, “gives us more time to look at the [EPA] regulations.”

The PSC was expected to rule on the settlement before Christmas.