The Kentucky Public Service Commission on Aug. 1 approved a December 2013 application from Kentucky Power to convert the coal-fired Unit 1 at the Big Sandy power plant from coal to natural gas for clean-air purposes.
The 800-MW coal-fired Unit 2 at Big Sandy is to be shut for the same reason, eventually leaving no coal-fired capacity left at this plant site in eastern Kentucky.
Kentucky Power, a unit of American Electric Power (NYSE: AEP), was approved for a certificate of public convenience and necessity to convert Big Sandy Unit 1 (BS1) from a coal-fired facility to a natural gas-fired unit. The capital cost of the proposed BS1 conversion, excluding allowance for funds used during construction and the cost of constructing a gas transport lateral, is approximately $50m. The annual operation and maintenance cost associated with the proposed conversion of BS1 is approximately $4.692m. The net present value of the costs of the lateral pipeline is estimated to be $49.35m over the 15-year term of that contract.
In order for BS1 to comply with the federal Mercury and Air Toxics Standards (MATS) requirements, Kentucky Power said that it must install additional costly emission-control equipment, switch fuels, or retire the unit. Due to the age of BS1, which was commissioned in 1963, and its relatively small size, Kentucky Power noted that the “relative economies of a large environmental investment” option to retrofit BS1 with pollution-control equipment “lacked sufficient scale to merit consideration.” BS1 would go from a 278-MW unit on coal to a 268-MW generator on natural gas.
Kentucky Power selected Columbia Gas Transmission LLC to construct and operate the $49.35m (present value) lateral pipeline. The Columbia Gas lateral pipeline will be constructed exclusively for use by Kentucky Power at the Big Sandy station, and will be in service by June 1, 2016.
The commission found that the conversion preserves a viable generating plant operating within the state, thus retaining some of the current employees and supporting the local tax base. “A converted BS1 also permits Kentucky Power to evolve from a utility whose generation has been significantly reliant on coal to one which is diversifying its fuel supply,” said the Aug. 1 approval order.
The PSC has previously approved Kentucky Power’s acquisition of half of the Mitchell coal plant in West Virginia to make up for the mid-2015 retirement of Big Sandy Unit 2.