Sign of change: Biomass plant will replace some power lost from closing of coal-fired plant in E. Ky.

Here's an emblematic sign of change in the Central Appalachian coalfield: A coal-fired power plant is closing and its owner will replace part of the electric generating capacity by purchasing more expensive power from a biomass plant in the coalfield, founded by the son of one of the region's most prominent coal operators. (NPR photo by Noah Adams: Big Sandy plant)

The Kentucky Public Service Commission last week approved a 20-year contract allowing Kentucky Power Co. to close its Big Sandy plant near Louisa and buy electricity generated by a biomass plant to be built by ecoPower, the Kentucky Press News Service reports. This change could lead to an increase in monthly bills for 173,000 customers and hurt a school system that receives nearly half a million dollars per year on tax revenue from the power plant, WYMT-TV in Hazard reports.

Kentucky law generally promotes lower-cost electricity, but a law passed by the state legislature this year allows utilities to include in their rates the cost of power from biomass plants. The chairman of ecoPower is Richard A, Sturgill, son of William B. Sturgill, a former state energy secretary who was a powerful, influential and sometimes controversial coal operator, largely due to his strip mines.

The agreement between the two power companies "promotes the inducement of an innovative energy-related business located in Kentucky that would advance the public purposes of achieving energy independence, creating new jobs and new investment and creating new sources of tax revenues," the PSC said in its order.

Kentucky Power said construction of the plant will employ 230 people for two years, and the plant will employ 30 people and create an additional 225 jobs for loggers and truckers. "The utility also argued that the ecoPower contract will spur economic development in its service territory and diversify its generation portfolio, which now relies largely on coal," the PSC said.

Kentucky Attorney General Jack Conway, who wants to run for governor in 2015, said he is considering legal action. His spokesperson told WYMT that "Kentucky Power did not thoroughly evaluate other options available to it, such as purchasing the power on the market from other electric utilities. Additionally the company did not conduct an economic feasibility study as the law." (Read more)