PPL’s Kentucky utilities — Louisville Gas and Electric and Kentucky Utilities, or LG&E/KU — will retire two coal-fired generating units totaling nearly 600 MW along with 47 MW of gas-fired generation under a Monday decision by the Kentucky Public Service Commission. The utilities will build a roughly 640-MW gas-fired plant to help replace the lost capacity.
The PSC rejected the utilities’ request to shutter two other coal-fired units totaling nearly 900 MW and replace them with a second 640-MW gas-fired plant, saying the retirements should be delayed until there is clarity around potential ozone-related emissions requirements and other environmental regulations.
Despite the changes, the utilities’ planned capital investments in Kentucky is “materially consistent” with their original $2.1 billion proposal, PPL said Tuesday in a Securities and Exchange Commission filing.
The PSC’s decision comes after Kentucky enacted a law in March that requires the commission to review proposed fossil-fueled power plant retirements, with a rebuttable presumption that they shouldn’t be shuttered.
Among other things, a utility must show a retiring power plant will be replaced with generation that maintains or improves grid reliability and that the retirement wasn’t caused by federal financial incentives or benefits.
“This case is fundamentally about the adequacy, reliability and cost of LG&E/KU’s generation facilities,” the PSC said. “This order attempts to maximize the reliability of those dollars that will be spent on generation and transmission facilities, while minimizing the risk of burdensome rates and stranded costs.”
The PSC said it was premature to retire the Ghent 2 and Brown 3 coal-fired units given the timing of overhaul costs and uncertainty surrounding their environmental compliance requirements.
The PSC approved the utilities' plan to build a 120-MW solar plant in Mercer County, Kentucky, and to buy a similar solar facility in Marion County, Kentucky, to be built by BrightNight.
It also approved four solar power purchase agreements totaling 637 MW with BrightNight, ibV Energy Partners and Clearway Energy.
“In nearly every scenario studied, the proposed solar reduced the total cost for customers by providing cheap energy,” the PSC said. The commission will determine how LG&E/KU will recover its PPA-related costs in a future case.
The commission also approved a 125 MW/500 MWh battery energy storage facility to be built at KU's E.W. Brown power plant, which it said will give LG&E/KU insight into operating and integrating large-scale storage to meet customer demand. The project is expected to cost $270 million, or $135 million if it receives federal subsidies, according to the PSC’s decision.
The PSC rejected calls that LG&E/KU acquire their resource needs by joining a regional transmission organization.
“If LG&E/KU are retiring generation, and customer demand requires replacement generation, this commission expects LG&E/KU to own or contract for the necessary resources, not depend on a capacity market where someone else is in charge of weatherization, maintenance and fuel assurance of those resources,” the PSC said.
Even so, LG&E/KU should continue to consider joining an RTO to maximize their investments for the benefit of its customers, and to take advantage of the reliability benefits of being in a larger system, the PSC said.
The PSC also approved LG&E/KU’s proposal for $340.7 million, up from $98 million, in energy efficiency and demand-side management programs. The utilities estimate their proposal will increase peak cumulative demand savings to 377 MW by 2030 from a previous projection of 296 MW.
PPL didn’t respond to a request to explain why its $2.1 billion generation replacement plan in Kentucky would remain essentially unchanged after the PSC rejected building a gas-fired power plant. However, the expected costs of LG&E/KU’s proposal increased since it was proposed in December, Vincent Sorgi, PPL president and CEO said in a Nov. 2 earnings conference call. The expected costs are confidential, he said.