The late-night order from the Kentucky Public Service Commission (PSC) was also the first time regulators interpreted a new law that makes it more difficult to retire coal-fired power.
The three-member commission allowed LG&E/KU to retire around 600 megawatts (MW) of coal-fired power at the Mill Creek Power plant in Jefferson County, as well as three smaller natural gas turbines. Keep in mind, one power plant can have multiple generating units.
The commission said retiring those units and replacing them with the 640-MW natural gas combined cycle generating unit is cheaper and more reliable than the cost of maintaining and upgrading the coal units.
But the PSC also denied LG&E/KU’s request to build a second gas unit at the E.W. Brown Generating Station in Mercer County. Relatedly, the commission denied the utility’s request to retire two other larger coal-fired generating units -- Ghent 2 in Trimble County and Brown 3 in Mercer.
In total, the commission approved five of seven requests to retire fossil fuel units, and one of two requests for brand new natural gas units.
In the order, the PSC argues the timing is premature given the uncertainty of future environmental policies such as proposed greenhouse gas standards for power plants. Kentucky Resources Council attorney Byron Gary said the commission is treading lightly with their decision.
“They are trying to buy time around that environmental regulation uncertainty and what the future looks like around energy production in the U.S. and in Kentucky, in particular,” Gary said.
LG&E/KU President John Crockett wrote in an op-ed last week that it’s cheaper and more reliable to invest in natural gas and solar resources than “aging coal units that emit far more pollutants.”
Crockett said in a statement Tuesday the PSC’s order will allow the utility to continue to serve customers reliably.
“We are pleased that the commission approved many aspects of our plan that will allow us to continue serving our customers safely and reliably, though we remain concerned that the deferral of the second [natural gas combined cycle generating unit] could increase costs to customers,” Crockett said.
Monday’s order will have little impact on utility rates for the moment. LG&E/KU will have to apply for rate changes in another case before regulators.
Energy and climate implications
There is a finite budget of carbon the world can emit, and still avoid the worst impacts of climate change. That budget appears to be shrinking even faster than we thought with one recent study finding that it could be used up in as fast as six years at the current rate.
Monday’s order approved LG&E/KU to build more than 1,000 MW of solar and battery storage. It also included a suite of new energy efficiency programs designed to help ratepayers reduce their own energy usage by about 200 MW.
The decision allows LG&E/KU to build one of the two 640-MW natural gas combined-cycle units they sought approval for. The gas plant will emit about 65% less carbon per megawatt hour from its stack than coal, but natural gas infrastructure is also prone to leaking and releasing methane — another potent greenhouse gas — that some studies show could offset the benefits.
LG&E/KU can also retire two smaller coal fired-power generating units, but can’t retire two larger ones.
“Herein, the Commission finds that the retirement of Ghent 2 and Brown 3, two large coal-fired units, is premature given the timing of overhaul costs and uncertainty surrounding environmental compliance,” the order states.
Ultimately, the changes will result in only a “marginal shift” in LG&E/KU’s energy mix from coal to natural gas. As a result, LG&E/KU will continue to primarily burn coal for power, followed by natural gas.
And while the order allows for a substantial increase in LG&E/KU’s renewable generation, it still represents only a small part of the utilities’ overall energy portfolio.
Improving air quality in Jefferson County
Louisville has long struggled to reduce the local ozone pollution that contributes to a variety of health risks, particularly for people with asthma and respiratory health problems.
The region is currently not meeting federal ozone standards, but city and state officials have asked the U.S. Environmental Protection Agency to reclassify the region as meeting the health standard for ozone pollution.
The two coal units that LG&E/KU can now retire are the largest emitters of nitrogen oxides in the Louisville area. Those emissions contribute to the formation of ozone pollution, so much so that LG&E has to limit operation of the units during ozone season, according to the order.
Gary, with the Kentucky Resources Council, said the net result will improve air quality for the region.
“We would have been happier, certainly, with no additional emitters in Jefferson County. But overall, this is definitely going to be an improvement for air quality,” he said.
This story has been updated with additional information.
