Kentucky Power to invest nearly $1B on coal-fired power plant improvements

Source: Kentucky Power

Kentucky Power Company, a unit of American Electric Power (NYSE: AEP) announced plans to invest approximately $940 million in its coal-fired  Big Sandy Power Plant near Louisa to meet increasingly stringent federal EPA environmental regulations. The investment is needed to construct a dry flue gas desulfurization (DFGD) or “scrubber” system on the plant’s 800-megawatt electricity generation unit. The current plan for the plant’s other generating unit (the older of the two; rated at 278 megawatts) is to retire it at the end of 2014. However, we continue to evaluate alternative options. 

The announcement followed a formal filing today of an Application for a Certificate of Public Convenience and Necessity before the Kentucky Public Service Commission which must approve the project and investment. The case seeks to recover the costs – which won’t be collected from customers until after the system is operational (sometime in 2016) – associated with building the DFGD system from Kentucky Power’s ratepayers. If approved, a Kentucky Power residential customer using 1,000 kilowatt hours per month would see an increase on his/her bill of approximately $31 per month, or about 31 percent. Currently, that customer pays about $98 per month and after the increase would pay approximately $129 per month. 

If approved by the Commission, the DFGD project should be completed sometime in 2016. The company estimates that as many as 700 jobs will be created during the construction period, most of which will be directly utilized in building the DFGD system. Those jobs will have a direct, positive impact on the local and regional economies over the course of the next few years. 

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“Kentucky Power looked long and hard at the best way to meet its environmental obligations at Big Sandy Plant and after much study and analysis, the scrubber system emerged as our least-cost option,” said Greg Pauley, president and chief operating officer of Kentucky Power. “By investing in the plant and the new scrubber system, we will be able to comply with environmental regulations as well as retain local jobs. It will also enable Big Sandy Plant to continue burning millions of tons of coal each year and ensure that Kentucky Power remains a large part of the area’s economy for years to come.” 

“In this trying economy we are conscious of the impact any rate increase will have on our customers. However, this investment is in the best interest of our communities overall and will permit job retention, a significant contribution to the tax base and the continued use of coal which employs so many individuals in eastern Kentucky,” Pauley said. “Customers should know that Kentucky Power will make every effort to bring the project in on time and within budget, thus lessening any further rate impacts.” 

A scrubber or DFGD system uses chemical and mechanical processes to remove sulfur dioxide (SO2) produced by burning coal. It does this by “scrubbing” the gas produced from coal combustion when making electricity. Scrubbers can remove up to 98 percent of the SO2 from the flue gas stream. Scrubbers have been shown to remove oxidized mercury as well. 

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