The key components of Kentucky Power’s 2013 integrated resource plan (IRP), filed Dec. 23 at the Kentucky Public Service Commission, include the acquisition of 50% of the coal-fired Mitchell plant in West Virginia.
The PSC approved the Mitchell buy earlier this year, but the state Attorney General has taken that decision to court as being too expensive for ratepayers.
The major elements of the new IRP are:
- Transfer a 50% undivided ownership interest of the Mitchell Plant (780 MW) from affiliate Ohio Power Co. (OPCo) to Kentucky Power, to replace the 800 MW Big Sandy Unit 2 which is scheduled to retire in 2015;
- Convert Big Sandy Unit 1 (278 MW) to burn natural gas instead of coal;
- Continue to purchase 393 MW of power from the Rockport coal units in Indiana;
- Make increased investment in demand-side management; and
- Purchase the output of the 58.5-MW ecoPower Hazard LLC biomass plant starting in 2017.
Additionally, Kentucky Power considered the purchase of 100 MW of wind power as part of this IRP process and may pursue a Purchase Power Agreement (PPA) for wind power for delivery beginning in 2015. Kentucky Power evaluated other supply- and demand-side measures and, as a result, expects that utility-scale solar resources will become economically justifiable by 2020 and that customer-owned solar generation will begin to be economical to customers prior to that, further reducing the requirements for new utility-owned generation. At the same time, these “non-traditional” resources will provide the company with much-needed energy resources.
As it reduces its coal presence, this American Electric Power (NYSE:AEP) subsidiary said that coal market volatility is a key issue.
“Coal market price volatility has increased due to various events affecting the supply and demand posture of coal in the international markets,” Kentucky Power noted. “Various countries have lessened their previously stated export coal quantities to rebuild domestic stockpiles, which caused all international coal markets to tighten and prices to rise significantly. Additionally, the decreased value of the U.S. dollar relative to most major foreign currencies contributed to U.S. coal being more competitive based on price in the international export market. There also has been an increasingly strong demand for coal world wide, especially in emerging economies, along with sustained coal consumption in the United States. Early last year the global demand for coal seemed insatiable and that demand placed a significant upward pressure on the price of coal. Conversely, since last fall, there was a slow down in the world and U.S. economies, that reduced demand for U.S. coal and has effectively lowered the market price.”
Kentucky Power’s owned capacity consists of the 1,078-MW Big Sandy plant, located in Louisa, Ky. Kentucky Power also has a unit power agreement with AEP Generating Co. (AEG), an affiliate, to purchase 15% (currently a total of 393 MW) of capacity from the two units at the Rockport plant, located in southern Indiana. Both Kentucky Power Rockport unit power agreements run through Dec. 7, 2022. For planning purposes, it has been assumed that the Rockport agreements extend indefinitely beyond that expiration date. Starting Jan. 1, 2014, Kentucky Power will own 50%, or 780 MW, of both the Mitchell units, which are located in northern West Virginia and are currently owned by affiliate Ohio Power.