Six months after withdrawing a $1 billion plan to retrofit its 49-year-old Big Sandy coal-fired plant near Louisa, Ky., from the Kentucky Public Service Commission (PSC), American Electric Power (AEP) operating unit Kentucky Power on Wednesday announced it would retire the plant’s 800-MW Unit 2 by 2015 and will decide on the future of its 278-MW Unit 1.

The company in a filing sought approval from the PSC to recover $530 million in costs associated with transferring 50% of AEP Ohio’s ownership of the 1,560-MW Mitchell Generating Station near Moundsville, W.Va., to Kentucky Power to replace power from the retired unit. Kentucky Power seeks to obtain 50% of the output of Mitchell’s 770-MW Unit 1 and 790-MW Unit 2, for a total transfer of 780 MW, but it must first garner approval from the PSC as well as from the Federal Energy Regulatory Commission. 

Both Mitchell units are equipped with advanced environmental controls, including flue gas desulfurization systems (FGD) or “scrubbers” and meet all current Environmental Protection Agency requirements, AEP said in a statement. The other 50% ownership in both units would be transferred to Appalachian Power Company (APCO), another AEP subsidiary, pending approval of APCO’s regulatory authorities. APCO will operate and maintain the Mitchell Plant.

AEP  temporarily withdrew plans to install a scrubbed system on Big Sandy’s Unit 2 in June, saying it wanted to reevaluate alternatives to meeting the company’s obligations under the federal Cross-State Air Pollution Rule, the Mercury and Air Toxic Standard, and other environmental standards. The filing on Wednesday would result in an estimated 8% increase on customers’ bills compared with an increase of about 31% that would have resulted had AEP proceeded with a plan to install a scrubber system at Big Sandy.

 “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. While it does represent an increase in customer’s rates of about eight percent, it is substantially less than our previous filing and will save our customers millions of dollars while bringing us into environmental compliance,” said Greg Pauley, president and chief operating officer of Kentucky Power.

“When we withdrew our scrubber filing last summer, we stated that we felt new opportunities were emerging that would allow us to meet our obligations at a lower cost. The possibility of transferring these Mitchell Units was among those opportunities and doing so will allow us to reduce the impact on customers’ bills,” Pauley added.

Kentucky Power said it has yet to decide the future of Big Sandy’s 278-MW Unit 1, the smaller and older of the plant’s two generating units. A filing to cover the future generating capacity of that unit will be submitted to the PSC sometime in 2013. “In the meantime, the company plans to issue a Request for Proposals (RFP) early next year to potentially replace the generation from the Unit,” it said. “The proposals will be evaluated along with the possibility of converting Unit 1 to natural gas combustion. Unit 1 is scheduled to be retired as a coal-fired generator in 2015.”

“In the coming months, we will determine a plan to address the remaining generating unit at Big Sandy Plant,” Pauley said. “We will perform our due diligence to determine an affordable plan that balances the needs of our customers, shareholders and the environment. When we reach that decision, we will announce it publicly. Until then, we appreciate our customers’ and employees’ continued patience as we evaluate and determine the best means to address the future of Big Sandy.”

Source: POWERnews, AEP