U.S. Markets closed

Arrangements being made to close coal-fired plant

FRANKFORT, Ky. (AP) -- The Public Service Commission conditionally approved a proposal Monday by Kentucky Power Co. to purchase half interest in a power plant in West Virginia to supply electricity in parts of eastern Kentucky.

That agreement came after Kentucky Power withdrew an earlier proposal to retrofit the 800-megawatt Big Sandy plant north of Louisa with an emission-removing scrubber, opting to close the plant instead.

On Monday, the PSC authorized Kentucky Power to purchase a 50 percent interest in Ohio Power Co.'s 780-megawatt Mitchell plant south of Moundsville, W.Va. Both are subsidiaries of American Electric Power Co.

Under a 2007 federal court consent decree, Kentucky Power agreed to close the unit in mid-2015 unless it is upgraded to meet stricter air emission standards. Kentucky Power plans to close the 800-MW unit and has said it intends to seek PSC approval to convert a 278-MW unit at Big Sandy to burn natural gas instead of coal.

Although the Mitchell acquisition will be the least costly for Kentucky Power and its 173,000 ratepayers in 20 eastern Kentucky counties, the PSC noted that the shutdown of the larger Big Sandy unit will mean job losses and a sharp decline in local tax revenue.

To help offset that, Kentucky Power pledged to spend $100,000 annually on economic development initiatives, including $33,000 for job training programs through the Kentucky Community and Technical College System.

Kentucky Power also agreed to double its energy efficiency investments, which includes weatherizing homes, incrementally over the next three years from $3 million to $6 million.

The agreement includes provisions to freeze Kentucky Power's base rates until May, 31, 2015, and to withdraw a pending application to increase rates by 24 percent. It also includes a commitment by Kentucky Power to consider the purchase of 100 megawatts of wind power the next time the company seeks additional generating capacity.

The Sierra Club heralded the agreement as "an important moment in Kentucky history."