Kentucky Utilities and Louisville Gas and Electric on June 7 filed rebuttal testimony with the Kentucky Public Service Commission in a case where they are arguing for approval of closure costs for coal waste areas under the Environmental Cost Recovery (ECR) rate passthrough mechanism.
Robert M. Conroy, Vice President, State Regulation and Rates, for Kentucky Utilities (KU) and Louisville Gas and Electric (LG&E) and an employee of LG&E and KU Services Co., provided the lead rebuttal testimony. These companies are subsidiaries of PPL Corp. (NYSE: PPL).
Conroy wrote: “My testimony rebuts two assertions made in the testimony of Kentucky Industrial Utility Customers, Inc. (“KIUC”) witness Lane Kollen, namely that the cost of the proposed surface-impoundment closures at the Green River, Pineville, and Tyrone Generating Stations (KU Project 39) do not qualify for recovery through KU’s environmental cost recovery (“ECR”) mechanism, and that the Commission should condition any certificates of public convenience and necessity (“CPCNs”) or other approvals granted for the Companies’ other proposed projects such that the Companies would have to seek additional Commission approval for any cost change of 10% or more or for any material change in the scope of any project.
“My testimony demonstrates that there is ample support from KRS 278.183 and Commission precedent for the Commission to approve KU’s request to recover Project 39’s cost through KU’s ECR mechanism. It further demonstrates that the Commission’s existing review authority and processes—including the Commission’s statutorily prescribed six-month and two-year ECR review proceedings—provide the Commission adequate oversight of approved ECR projects and their costs, obviating the need for any conditions upon CPCNs granted in these proceedings.”
John N. Voyles Jr., the Vice President of Transmission and Generation Services for KU and LG&E and an employee of LG&E and KU Services, said in supporting testimony: “My testimony shows the projects are economical and necessary—indeed, the surface-impoundment closures cannot be avoided under the federal Coal Combustion Residuals (“CCR”) Rule, and the proposed process-water facilities are necessary to allow the Ghent, Trimble County, E.W. Brown, and Mill Creek Generating Stations to continue to produce electricity from coal.
“My testimony further shows that the Companies do not stop analyzing the cost-effectiveness of projects for which the Commission grants approval, but rather reevaluate consequential projects when material changes in regulations or other events occur that might alter the cost-benefit analyses previously performed. Relatedly, as engineering, closure plans, and cost estimates progress and mature, variations of the scope and contingency ranges related to the projects narrow, giving the Companies an increasingly accurate view of the projects’ costs, which the Companies use to ensure the projects remain economical. Based on the progress of engineering since our applications were filed, I continue to conclude that these projects remain prudent and lowest-reasonable-cost, and that the conditions Mr. Kollen asks the Commission to place on any approvals for Projects 40, 41, and 42 9 (KU) and Projects 29 and 30 (LG&E) are unnecessary and unreasonable.
“Finally, I note that accepting Mr. Kollen’s argument to disallow ECR recovery for Project 39 (surface-impoundment closures at the Green River, Pineville, and Tyrone Generating Stations) would effectively penalize KU for doing what was economically advantageous for its customers, namely retiring the coal units at Green River in October 2015 rather than April 2016 as KU had planned, which prevented Green River from being subject to the requirements of the CCR Rule, in turn reducing costs for customers. I recommend the Commission reject KIUC’s argument to penalize KU for acting prudently on its customers’ behalf, and approve ECR recovery of the costs of Project 39 as proposed.
“At the Green River Generating Station, KU had previously obtained the necessary permissions under the federal Mercury and Air Toxics (“MATS”) Rule to delay retiring Units 3 and 4 until April 2016 to complete necessary transmission projects that preserve system reliability. KU had already determined it was uneconomic to install controls necessary to comply with MATS Rule. But when KU determined that retiring the Green River units before October 19, 2015, would enable the station not to fall under the CCR Rule’s requirements, thus avoiding long-term monitoring and reporting requirements in the Rule, KU was able to accelerate the transmission projects and changed its plans at Green River, allowing an earlier retirement of the units.
“But KIUC’s recommendation to disallow ECR cost recovery for Project 39 (surface-impoundment closures at Green River, Pineville, and Tyrone) would have the unavoidable effect of penalizing KU for doing the right thing, such as retiring the Green River units in October 2015. Had KU continued to operate Green River Units 3 and 4 until April 2016 as originally planned, there would be no question that the Green River surface impoundments would fall under the CCR Rule; KIUC has neither contested the necessity of closing surface impoundments under the CCR Rule, nor has it contested the ECR cost recovery associated with such closures. I respectfully submit to the Commission that it should reject KIUC’s contention to penalize KU for doing the right thing for customers; instead, it should allow KU to have ECR cost recovery of Project 39 as proposed.”
In a June 6 order in this case, the commission scheduled a June 9 informal conference for the purpose of discussing any issues in this matter and to engage in possible settlement discussions.