Smith Station

Smith Station includes proposals for two 278 megawatt (MW) circulating fluidized bed plants at one location. The first unit was initially planned for 2010 completion, assuming a 2007 date for the onset of construction. The date for construction of the second unit has not been decided. The plant received a permit from the Kentucky Public Service Commission in 2006, and the permit was reaffirmed in May 2007 after one of the participants, Warren RECC, pulled out of the project.

The Sierra Club reports: "On March 3, 2008, Sierra Club, Kentucky Environmental Foundation and Center for Biological Diversity sued the federal Rural Utilities Service (RUS) arguing that the RUS failed to properly conduct an environmental assessment of East Kentucky Power's plans to build a new coal-fired plant and transmission lines at its J.K. Smith power station in Clark County. The groups argue that the RUS should have assessed the potential environmental effects from the new plant and the transmission lines in one environmental assessment rather than looking at each project separately."

The East Kentucky Power Cooperative was turned away by the Rural Utilities Service when the agency issued a moratorium on loans for new coal-fired power plants in early 2008. Despite this decision, the RUS is conducting a supplemental environmental impact statement, and a spokeperson for the EKPC suggested that the loan might become available at a later point.

In April 2009, Sierra Club, Kentuckians for the Commonwealth, and the Kentucky Environmental Foundation released a report prepared by TR Rose Associates concerning the economic viability of the first proposed Smith plant. The report found that East Kentucky Power Cooperative's current financial position is weak, and that its effort to build a new power plant is a major hindrance to improving its credit status. The study also found that EKPC has significantly underestimated the cost of power from the Smith plant, and that cancelling the new plant would avoid a rate increase of at least 5 percent to recover construction and operation costs. The report's recommendations included abandoning plans to build the new plant, and instead moving forward with less risky and less capital-intensive investments, energy efficiency, renewable energy, and natural gas generation.

In April 2010, East Kentucky Power Cooperative began backing away, at least for a while, from its long-sought plans to build the plant. The cooperative filed a request with the state Public Service Commission (PSC) asking that the panel allow it to withdraw its request for commission approval of up to $900 million in private financing. However, the withdrawal of the request for financing doesn't kill the power plant project. The cooperative still has what's called a "certificate of public convenience and necessity" from the commission that allows it to build the plant, although that can expire. The co-op must begin construction on the plant within one year of receiving all the necessary permits from other governmental agencies. Approval of the permits is linked to two studies currently being done with the Army Corps of Engineers, which are not expected to be completed until next spring. The proposed cost of the plant has varied and the estimate was at one point raised from $553 million to $767 million to, as East Kentucky Power's request to the PSC shows, up to $900 million.

On June 15, 2010, the Sierra Club and Kentuckians for the Commonwealth, represented by Earthjustice, challenged a decision by the federal Rural Utilities Service (RUS) to allow the EKPC to waive federal debt obligations and seek private financing for the Smith plant. According to the groups, RUS gave the approval without thoroughly analyzing EKPC’s perilous financial situation or environmental impacts and risks of the new coal plant--a decision that leaves taxpayers exposed to unnecessary financial risk.

On June 25, 2010, the Kentucky Public Service Commission (PSC) said that it would review whether East Kentucky Power Co-op needs to build the power plant. The commission said it would examine whether the proposal for the planned Smith plant is the least-costly option for meeting projected electricity demand and what impact the construction would have on the co-op's overall finances. The proposed cost at one point was raised to $767 million ($2,758/ kW) from $553 million ($1,989/kW), but the co-op said the costs could run as high as $900 million ($3,237/kW). The PSC also approved a request from East Kentucky Power to withdraw a financing application.

On Nov. 18, 2010, EKPC entered into an agreement with Kentuckians For The Commonwealth, Kentucky Environmental Foundation, the Sierra Club, three individual co-op members, the Kentucky attorney general, and Gallatin Steel (EKPC’s biggest industrial customer) to halt plans for the Smith plant by abandoning the permits needed to proceed with construction. The cooperative also committed $125,000 toward a collaborative effort in which the public interest groups, EKPC and member co-ops will work together to evaluate and recommend new energy efficiency programs and renewable energy options.

According to Kentuckians for the Commonwealth, "a number of factors contributed to the decision to not to move forward with the proposed plants, including lower than expected demand for electricity, a moratorium imposed by the Bush Administration on low-cost federal loans for coal-burning power plants, and sharply rising costs associated with building and operating new coal plants. In June 2010, the Public Service Commission opened an investigation to determine if proceeding with the $819 million project was cost-effective and necessary. Studies commissioned by the public interest groups participating in this agreement concluded that a combination of clean energy technologies would be a cost-effective way to meet EKPC’s demand, while also reducing financial risk to customers, generating jobs throughout the region, and benefiting health and the environment."

Project Details
Sponsor: East Kentucky Power Cooperative Location: Clark County, Kentucky Capacity: 278 MW Type: Circulating fluidized bed Projected in service: 2011 Status: Permitting

Financing

 * Bank of America
 * Credit Suisse
 * JP Morgan Chase
 * Merrill Lynch
 * Morgan Stanley
 * Wells Fargo

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 * US proposed coal plants (both active and cancelled)
 * Coal plants cancelled in 2007
 * Coal plants cancelled in 2008
 * State-by-state guide to information on coal in the United States (or click on the map)