Utilities in Kentucky to Spend Billions to Meet New EPA Rules

---

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Power plant emissions rules from the U.S. Environmental Protection Agency (EPA) (Washington, D.C.) are driving several billion dollars of project spending at two affiliated electric utilities in the state of Kentucky. The utilities, Kentucky Utilities Company (KU) (Lexington, Kentucky) and Louisville Gas and Electric Company (LG&E) (Louisville, Kentucky), are units of PPL Corporation (NYSE:PPL) (Allentown, Pennsylvania).

In mid-2012, these two utilities expect to award more than $1 billion in contracts for two significant pieces of capital work:

• construction of Cane Run Unit 7, a 640-megawatt (MW) natural gas-fired, combined-cycle gas generator to be built in southwest Louisville
• modernization of the flue gas desulfurization (FGD) unit at the Mill Creek Power Station, a 1970s-era plant in Louisville

The utilities also plan to close these coal-fired generators by 2016:

• the three operating units at the Cane Run Power Station
• the Green River Power Station, a 163-megawatt (MW) generator that entered service in 1950
• the Tyrone Power Station, a 75-MW generator that began operating in 1947 and was shuttered in March 2011

"When we did our analysis, doing the retrofits on these three plants was going to be more expensive than our other alternatives," KU spokeswoman Chris Whelan told Industrial Info Resources. "More than 85% of our electricity comes from coal, and coal will continue to have a role in Kentucky. But we are required to provide electric service at the lowest cost. In the case of Cane Run Unit 7, it was cheaper to build a new gas-fired, combined-cycle unit than it was to install pollution-control equipment at those three stations."

Kentucky Utilities also will:

• install fabric filter baghouses to control mercury emissions on all three units of the Ghent Power Station, a 1970s-era station in Ghent, Kentucky
• install a fabric filter baghouse on Unit 3 of the E.W. Brown Power Station, a 1950s-era power plant in Harrodsburg, Kentucky

The utilities also plan to install fabric filter baghouses on all units of Mill Creek and install a fabric filter baghouse on Unit 1 of its Trimble County Power Station in Bedford, Kentucky. The Trimble County plant began operating in 1990.

EPC contracts for that work are expected to be awarded in the fourth quarter of 2012. As part of a late 2011 settlement with Kentucky regulators, the utilities were given an additional two years to install baghouses at units 1 and 2 of the Brown station.

"Over the next few years, construction will be going on at virtually every generator we own," Whelan said in an interview.

Finally, the utilities asked permission from the Kentucky Public Service Commission (Frankfort, Kentucky) to spend about $110 million to buy three operating simple-cycle, gas-fired combustion turbine generators totaling 495 MW from Bluegrass Generation Company LLC (La Grange, Kentucky), a unit of LS Power Group (New York, New York). Regulators are expected to rule on that request in the coming weeks.

All of these strategic changes are necessary to keep KU and LGE in compliance with recent EPA emissions regulations like the Cross-State Air Pollution Rule and the Mercury and Air Toxics Standards rule. For more on those new regulations, see October 13, 2011, article - EPA Proposes Technical Changes to Finalized Cross-State Air Pollution Rule, and December 27, 2011, article - Environmental Protection Agency Finalizes Mercury and Air Toxics Standards.

View Project Report - 300045461 300047759 23001775 23001631 23002133 23001722 23002528 300049439

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.