September 16, 2011 / 3:43 PM / 8 years ago

UPDATE 1-Three Kentucky coal plants to retire due to EPA rules

* Natural gas plants to replace retired coal units
    * Kentucky utilities get over 90 pct of power from coal
    * Utilities see $4 bln of costs to comply with EPA regs

    NEW YORK, Sept 16 (Reuters) - Kentucky power companies
Louisville Gas and Electric (LG&E) and Kentucky Utilities (KU)
said new, stricter, federal environmental regulations will
force them to retire three older, coal-fired power plants.
    To replace the lost coal-fired power, the companies are
seeking permission from Kentucky utility regulators to build a
640-megawatt, natural gas-fired combined cycle power plant at
the existing Cane Run coal plant in Louisville.
    The companies are also seeking state approval to buy three
small natural gas-fired turbines from Bluegrass Generation in
LaGrange, Kentucky, that will provide up to 495 MW during
periods of peak or high demand.
    One megawatt powers about 1,000 homes.
    The companies, units of Pennsylvania-based power firm PPL , had suggested in earlier filings that they could
retire the 563-MW Cane Run, 71-MW Tyrone and 163-MW Green River
coal plants, which entered service between 1953 and 1969.
    "Given the enormous cost and strict compliance timetable
required to retrofit some of our aging generation units with
additional technology, we've had to explore a lower-cost option
that results in retiring older coal units and replacing them
with natural gas units," Paul Thompson, a senior vice president
at LG&E and KU, said in a Thursday release.
    Over the past few years, the U.S. Environmental Protection
Agency (EPA) has proposed several regulations that could shut
50,000 MW or more of older coal- and natural gas-fired
generation, which could boost electric prices and threaten
power reliability in some regions.Environmental groups and several power companies with
mostly nuclear, natural gas and renewable generating fleets,
however, have applauded the EPA's efforts.
    The EPA moves would reduce emissions of sulfur dioxide,
nitrogen oxide and mercury and boost the amount of electricity
utilities can produce with cleaner but more expensive power
plants.
    COAL-HEAVY STATE
    The Kentucky utilities said about 97 percent of their
generating fleet is coal-fired. After the combined cycle gas
plant enters service and the coal plants retire, LG&E and KU
will be 90 percent coal-fired.
    In addition to the coal retirements and construction of a
gas plant, the utilities said, the EPA's new regulations will
require installation of additional emission controls and other
changes at some of their other coal plants no later than 2016
in order to maintain compliance.
    They estimated compliance with the environmental rules
could cost $4 billion in capital expenditures by 2019, with
over $3 billion of that incurred by the end of 2016.
    The companies said the new natural gas generators would
cost up to $800 million, of which about $110 million is for the
Bluegrass plant.
    The companies, which serve 1.2 million homes and businesses
in Kentucky and Virginia, did not seek to recover additional
costs from their customers in their filings this week, but said
they would seek to recover costs in future rate cases.
    The companies said rates for LG&E customers would likely
not be affected but KU ratepayers could see a roughly 4 percent
increase.
    Power rates in Kentucky, due primarily to the ample use of
low-cost, coal-fired generation, are among the lowest in the
United States. The average residential customer in the
Bluegrass State pays 6.5 cents per kilowatt hour versus the
national average of 9.8 cents, according to federal data.
    The companies said the combined cycle plant would require
fewer employees to operate but they had not yet determined the
full impact on the workforce.
    The companies said the Cane Run and Green River coal plants
would need to remain in service for reliability reasons until
2016, when the combined cycle plant was expected to start up.
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