Kentucky PSC approves new natural gas plants for LG&E/KU

Coal country is getting more natural gas-fueled power generation, as the Kentucky Public Service Commission said May 3 it has approved plans for two of the state’s regulated electric utilities to build and buy new gas plants.

With the move, PPL (NYSE: PPL) subsidiaries Louisville Gas & Electric (LG&E) and Kentucky Utilities (KU) are among the growing list of generators in and around coal-heavy regions that are expanding their gas fleet.

Stricter federal Environmental Protection Agency (EPA) regulations are forcing more than 13% of the LG&E/KU coal fleet capacity to retire by 2016, the companies said in a news release.

The Kentucky PSC approved a proposal by the utilities to build a 640-MW combined-cycle gas plant at the existing Cane Run station in Jefferson County, Ky., the PSC said. The companies also will purchase the 495-MW Bluegrass Generation simple cycle plant in LaGrange. It is designed to run only at times of peak demand.

Construction of the new plant at Cane Run will cost about $583m, the companies said in their application. That figure includes a new natural gas pipeline to the site. The purchase price of the Bluegrass Generation plant is $110m.

Construction of the Cane Run combined-cycle plant is expected to start this year and be completed in 2015. At the peak of construction, about 250 workers should be involved, the companies said.

In their application, KU and LG&E said that the additional generating capacity is needed to replace coal-fired units at the Cane Run, Green River and Tyrone plants, and to meet projected increases in demand for electricity by 2016.

In its order, the PSC agreed the companies had shown a need for new capacity and shown that gas-fired plants were the least-cost, reasonable option.

The PSC disagreed with environmental groups, including the Sierra Club and Natural Resources Defense Council, which said KU and LG&E could economically meet their power needs through a combination of wind power and more aggressive efforts to reduce the demand for electricity. But the PSC did say the utilities should more aggressively pursue their demand-side management program, particularly the parts targeting commercial customers.

Based on the need for replacement power, most of the cost and ownership of the new Cane Run gas plant would be allocated to KU. Most of the Oldham County plant would be allocated to LG&E. The companies say they do not expect the project to affect rates for LG&E customers, while KU customers would see rates rise by about 4% once the new plant is in operation.

The case number is 2011-00375.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.