6. COAL: Groups urge regulators to revoke approval of Ky. plant (10/29/2009)

Robin Bravender, E&E reporter

Advocacy groups and utility cooperative members are urging the Kentucky Public Service Commission to revoke its approval of a proposed coal-fired power plant due to lower demand estimates and rising costs.

The Sierra Club, the Kentucky Environmental Foundation, Kentuckians for the Commonwealth, and three members of the East Kentucky Power Cooperative asked the commission today to revoke the certificate of "public convenience and necessity" granted in 2006 to the proposed Smith plant, a 278-megawatt plant slated for Clark County.

In their complaint, the groups argue that the certificate was based on inflated electricity demand projections and that the funding once available for the plant had fallen through.

"EKPC can meet its future needs for electricity in a cost-effective and reliable way with energy efficiency measures and renewable energy sources such as wind, small-scale hydro and solar," the complaint says.

The utility's projections of its electricity requirements have turned out to be much higher than its actual requirements, the complaint says. The critics of the plant argue that the cooperative's forecast for its energy requirements in 2020 decreased between its 2004 prediction and its 2008 prediction by nearly 12 percent -- approximately the amount that the Smith plant would produce in a year.

Additionally, the plaintiffs say that rising capital costs and the loss of anticipated federal funding will impose an economic burden on utility customers.

The estimated capital costs have risen from $533 million in the 2006 order to an estimated $767 million. Also, the commission granted the certificate with the understanding that the utility would finance the Smith plant with funding from the Agriculture Department's Rural Utilities Service, the complaint says, but that funding is no longer available.

The Rural Utilities Service had issued $1.3 billion in loans for the construction of coal plants since 2001 but halted the practice in early 2008, citing rising construction costs and uncertainty over possible costs imposed by greenhouse gas regulations.

But EKPC spokesman Nick Comer said the plant would be needed to meet the region's long-term power demands. Since the proposal for that unit was announced in 2004, demand among the 16 member cooperatives has increased almost 9 percent, he said. And while the utility is pursuing efforts to use renewable fuels like landfill gas and switchgrass, the coal plant will be necessary to meet future energy needs.

"I think when you look at the facts, clearly there is a need for additional generating capacity," Comer said, adding that the Smith plant represents the most affordable way to meet that need.

And although the Rural Utilities Service funding is no longer available, EKPC is exploring its options for alternative financing, Comer added. "We're confident that affordable financing is available for this plant," he said.

Construction is expected to begin next year on the plant, which is slated to come online in 2013, Comer said.