Kentucky legislature seeks to expand state’s power over coal plants
A bill in Kentucky that could become law soon has the utilities industry concerned, along with environmental, business, and consumer groups that say the measure favors coal interests over ratepayers.
The bill, Senate Bill (SB) 349, which is sponsored by Kentucky Senate President Robert Stivers (R-Manchester) and State Sen. Robby Mills (R-Henderson), earlier this month passed the state Senate and is expected to pass the House of Representatives. It could soon be headed to the desk of Democratic Gov. Andy Beshear.
If enacted, SB 349 would create the new 18-member, state-run Energy Planning and Inventory Commission (EPIC) and an executive board that would have jurisdiction over coal plant closures, setting up a second layer of oversight after the Kentucky Public Service Commission (PSC) that bill opponents say would make it more challenging for utilities to retire coal plants.
The Kentucky House Natural Resources and Energy Committee recently approved SB 349 after the state Senate Natural Resources and Energy Committee approved the bill on March 12.
Bill sponsors Mills and Stivers say the goal isn’t specifically about keeping coal plants afloat, but rather to determine Kentucky’s most economical and reliable energy options for the future, particularly considering the increasing strains upon the state’s electrical grid.
Mills said during the March 21 House committee hearing prior to its passage of SB 349, that the legislation will establish a statewide energy policy and require that a utility cannot retire an old coal-fired power plant “until a replacement unit is fully constructed, permitted and in operation.”
“We are naturally an energy consumption universe based on fossil fuels,” added Stivers during the hearing. “There’s no doubt we’re in a period of transition, but the question is how fast should we transition?”
Several utilities testified against the bill during the March 6 Senate committee meeting.
“It’s just another layer of bureaucracy that I fear we’re talking about here,” said Louisville Gas & Electric (LG&E) and Kentucky Utilities (KU) President John Crockett, noting that the makeup of EPIC would inherently be a political body made up of 18 people with only two of them having the obligation to serve Kentucky energy customers.
“The balance is a collection of special interests, whether it be fuel producers, sellers, transporters, nuclear interests, the renewables crowd, that would seek to promote their own agendas as part of this process,” Crockett testified. “The executive committee is the only part of the commission that has any authority. It’s a five-person committee. It, by definition, can’t contain a member of the utility industry.”
Amy Spiller, president of Duke Energy’s utility operations in Ohio and Kentucky, also testified during the hearing and said it’s unwise to “simply suggest that an aging and antiquated unit must be kept online to solve all of the future growth needs in the commonwealth and we encourage what would be a collaborative conversation on this point.”
According to language in SB 349, the measure sets a high bar for a utility company to retire a coal plant by establishing that there will be “a rebuttable presumption against the retirement of a fossil fuel-fired electric generating unit… unless the utility will replace the retired electric generating unit with new electric generating capacity that is dispatchable, maintains or improves reliability, maintains minimum reserve capacity requirement, and has the same or high capacity value and net capability, unless utility can prove its not necessary.”
SB 349 also would require any utility seeking to decommission, demolish, or retire any existing coal, oil, or natural gas-fired electric generating plant to give notice to the executive committee no later than 365 days before submitting a retirement application to the Kentucky PSC.
Gary Meltz, executive director of Power for Tomorrow, said the group opposes SB 349 for two reasons.
“First, it will mean higher electric bills for Kentucky residents,” Meltz told Daily Energy Insider. “This is because the EPIC members are appointed by the legislature, with the goal of mandating that the state’s electrical utilities do not shutter older, aging, and economically inefficient coal powered electrical plants.”
But requiring the state’s electric utilities to operate inefficient plants means Kentuckians would be getting increasingly expensive electricity by operating these facilities rather than modern efficient power plants, said Meltz.
“Second, EPIC is a duplicative regulatory body that guarantees particular interests have standing at the state PSC,” he added. “Power for Tomorrow is an advocate for sensible regulation. Creating a second regulatory body that only guarantees the scales are tipped in favor of particular interests isn’t sensible.”
Likewise, Brad Viator, CEO of B Strategic, told Daily Energy Insider that SB 349 would indeed make it more challenging for utilities to retire coal plants.
“EPIC has coal interests on the commission and is designed for the purpose of keeping inefficient coal plants open longer than they should be, thereby putting coal interests over lower power bills for all Kentuckians,” said Viator. “What would make sense for Kentucky is to build newer electrical plants — powered by sources like natural gas — that cost less to operate than an outdated coal plant.
“But what EPIC seemingly plans to do is reverse that logic and divert utility investments away from modern power plants in order to keep inefficient coal plants online longer,” he said.
In fact, some opponents of SB 349 say that this new commission would have so much power that it could potentially decide to keep coal plants open to prevent capacity constraints on regional transmission organization PJM Interconnection LLC, leaving Kentucky customers footing the bill for keeping the grid operational in other states.
“I have heard that criticism, and if EPIC chooses to use their power to keep coal plants open for the betterment of PJM, as opposed to only considering the welfare of Kentuckians, lawsuits will persist,” Viator said. “And I suspect some will be successful.”
States only have jurisdiction over their own electric system, extending their jurisdiction as ‘good neighbors’ will open the commission up to litigation from both environmental groups, and wholesale electric providers, he explained.
“Environmental groups will sue because out-of-market coal plants are dirtying grids in other states,” said Viator. “Wholesale generators will sue because dispatching subsidized power to PJM will reduce the amount of money wholesale generators can make.”
While maybe well intentioned, Viator said that EPIC is “protectionist policy” that will cause Kentuckians to pay more for electricity than they need to over time.
“It creates more government bureaucracy, which will slow down the process of constructing new power plants, precisely at a time when electricity demand is at an all time high as data centers shop for places to bring their electricity demand and domestic manufacturing is experiencing a resurgence,” he said. “EPIC will threaten Kentucky’s economic competitiveness.”
Crockett at LG&E/KU said utilities have an obligation to serve their customers reliably, safely, and affordably.
“We’ve done so for more than 70 years on the basis of a least reasonable cost standard that has served Kentuckians well for a long time,” he said. “We don’t make retirement decisions or replacement generation decisions on the basis of the fuel source, instead we rely on reasonable least cost.”
Crockett also recommended forming a working group that the utility would participate in.
“We in this room know better than anybody else the fuel issues associated with this state,” he told legislators. “We are the state’s largest consumer of fossil fuels. Our fleet is likely to be 90 percent fossil fuels for years and years to come. We are and continue to be the single largest purchaser of coal. That is not going to change.”
Spiller said there needs to be a comprehensive, collaborative conversation “that is not artificially weighted toward one preference.”
“We [also] would suggest a working group that includes utilities, RTOs, fuel suppliers, regulators, lawmakers and consumers so that we can all collaborate and discuss the issues that impact Kentucky,” she said.
Tammy Wilson, vice president of public affairs at the Northern Kentucky Chamber of Commerce, also testified to the Senate committee earlier this month, noting that SB 349 would have significant implications for economic development in Kentucky. The legislation prioritizes one fuel source over reliability and affordability, she said, while the new commission that would be created serves as a barrier to transitioning to natural gas, which will be cheaper for communities. “Natural gas also helps attract investment from companies, particularly manufacturers to Kentucky, because of the low energy costs. Many companies also demand a cleaner, more reliable form of energy, in addition to low-cost electricity to meet their own emission goals,” Wilson said.
“While we empathize with Eastern Kentucky and the loss of jobs associated with the coal industry, we feel strongly that forcing our members and potential members to pay more for their energy simply to ensure we continue to support the coal industry is not a reasonable ask of the Northern Kentucky region,” Wilson added.
There are numerous other opponents of SB 349, including the Council for Citizens Against Government Waste, the Kentucky Conservation Committee, and the Kentucky Forum for Rights, Economics & Education.
