FRANKFORT, KY -- Kentucky Power customers will save millions of dollars in environmental-related costs through a filing made today with the Kentucky Public Service Commission. The filing outlines Kentucky Power’s proposal to address environmental compliance at its Big Sandy Power Plant located near Louisa and replaces a “scrubber system” filing the company withdrew from consideration six months ago.

Today’s filing seeks approval to recover approximately $530 million in costs associated with transferring 50 percent of the ownership of the Mitchell Generation Station, currently owned by AEP Ohio, an American Electric Power subsidiary, to Kentucky Power. The generation obtained from Mitchell would substantially replace the generation of the 800-megawatt Unit 2 at Big Sandy, which will be retired from service in 2015.

The Mitchell Plant is located near Moundsville, W.Va., and has a total generating output of 1,560 megawatts. Kentucky Power seeks to obtain 50 percent of the output of Mitchell’s 770-megawatt Unit 1 and 790-megawatt Unit 2, for a total transfer of 780 total megawatts. Both Mitchell units are equipped with advanced environmental controls, including flue gas desulfurization systems (FGD) or “scrubbers” and meet all current EPA requirements. The other 50 percent 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.

The filing today -- along with savings from the termination of a power interconnection agreement coinciding at the time of the transfer -- will result in an estimated eight (8) percent increase on customers’ bills. This means customers using 1,000 kilowatt hours per month would see an increase on their bills of approximately $6.00 per month. Currently, those customers pay about $94.00 per month; after the increase they would pay approximately $100.00 per month.

Under Kentucky Power’s previous filing, the company planned to install a scrubber system on Big Sandy’s Unit 2. That project would have resulted in a roughly 31 percent increase on monthly bills or an increase of about $31.00 on a customer using 1,000 kilowatt hours.

In addition to approval from the Kentucky Public Service Commission, the transfer also requires the approval of the Federal Energy Regulatory Commission (FERC). If approved, customers will not see a rate increase associated with this filing until Jan. 1, 2014 at the earliest, pending additional approval of a future base rate case. 

“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 said.

Kentucky Power has yet to decide the future of Big Sandy’s 278-megawatt 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 Kentucky Public Service Commission 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. 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,” Pauley said.

“Although the plant will continue to run as it does today for a couple more years, any employee affected by today’s announcement will have the opportunity to pursue other job prospects with AEP and Kentucky Power,” Pauley said.

Another component of the filing seeks approval to defer approximately $30 million dollars associated with study and engineering work involving this and other environmental filings concerning Big Sandy Plant.

Kentucky Power is an operating unit of American Electric Power and provides electricity to approximately 173,000 customers in all or parts of 20 Eastern Kentucky counties. The company is headquartered in Frankfort and has major operating facilities in Ashland, Hazard, Louisa and Pikeville.

American Electric Power is one of the largest electric utilities in the United States, delivering electricity to more than 5 million customers in 11 states. AEP ranks among the nation’s largest generators of electricity, owning nearly 38,000 megawatts of generating capacity in the U.S. AEP also owns the nation’s largest electricity transmission system, a nearly 39,000-mile network that includes more 765-kilovolt extra-high voltage transmission lines than all other U.S. transmission systems combined. AEP’s transmission system directly or indirectly serves about 10 percent of the electricity demand in the Eastern Interconnection, the interconnected transmission system that covers 38 eastern and central U.S. states and eastern Canada, and approximately 11 percent of the electricity demand in ERCOT, the transmission system that covers much of Texas. AEP’s utility units operate as AEP Ohio, AEP Texas, Appalachian Power (in Virginia and West Virginia), AEP Appalachian Power (in Tennessee), Indiana Michigan Power, Kentucky Power, Public Service Company of Oklahoma, and Southwestern Electric Power Company (in Arkansas, Louisiana and east Texas). AEP’s headquarters are in Columbus, Ohio.

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