Kentucky lawmakers advance bill to slow coal retirements despite utility objections

Kentucky lawmakers advanced a bill that could slow or halt the retirement of coal-fired power plants in the state over concerns about grid reliability, despite objections from the state's major utilities.

Senate Bill 4, introduced Feb. 7, would prohibit the Kentucky Public Service Commission from approving utility requests to retire coal-fired electric generation resources unless the utility demonstrates that the retirement will not negatively impact the reliability or resilience of the grid or the affordability of customer electric rates.

Utility representatives told senators during a Feb. 22 hearing that the proposal could effectively block them from retiring coal plants regardless of how uneconomical they have become. Lawmakers backing the bill argued that rolling blackouts utilities implemented during frigid winter weather in December 2022 prompted another look at retiring generation, even aging coal plants.

"Coal is reliable, resilient, affordable and provides energy security for our state and our nation. We all know and understand the nation's power grid is changing, but this change must take place gradually to avoid jeopardizing the reliability of our grid," state Sen. Robby Mills, who introduced the bill, said during the Natural Resources and Energy Committee hearing.

Coal plants generate the majority of electricity in Kentucky, according to the U.S. Energy Information Administration. According to S&P Global Market Intelligence data, Kentucky hosts about 9,500 MW of operating coal-fired capacity.

But utility executives told lawmakers such legislation could be costly to customers and hurt efforts to reduce carbon emissions in the face of worsening climate change.

Reliability concerns

"We are unsure what Senate Bill 4 actually does to enhance reliability in the state," said Kent Blake, CFO of PPL Corp. utility subsidiaries Kentucky Utilities Co. and Louisville Gas and Electric Co.

Rocco D'Ascenzo, deputy general counsel of Duke Energy Corp. subsidiary Duke Energy Kentucky Inc., said the proposal would effectively leave utilities "not able to close a fossil fuel plant."

"That isn't hyperbole," D'Ascenzo said during the Feb. 22 hearing. "The bill would force our Northern Kentucky customers to continue to pay into perpetuity the operation, maintenance costs as well as incremental capital investments that we may have to make for a plant that is no longer burning any fossil fuels and not producing any energy."

The bill would require state regulators to have regional grid operators affirm that coal plant retirements would not "increase the risk of forced curtailments to retail customers during periods of peak demand." But D'Ascenzo said that could create an "impossible hurdle" for utilities by misrepresenting the role regional grid operators play in the market since they do not sell to retail customers.

Utilities in Kentucky participate in both the Midcontinent ISO and PJM Interconnection LLC markets.

The proposed legislation puts utilities operating in the state in the "untenable position where a retirement decision, no matter how justified as part of a least-cost, most reliable and efficient resource plan, could never pass muster," D'Ascenzo said.

While the utilities appreciated lawmakers' grid reliability concerns, Blake said the legislation contains unintended consequences that could have adverse effects on reliability. Processes for state regulators to oversee reliability already exist, Blake added, including a requirement that utilities present plans every three years to the Public Service Commission about providing adequate, reliable power at the lowest cost possible.

Blake also told senators that when utilities propose a plant retirement, "you can believe that now is the time. That's what our very extensive analysis would show."

S.B. 4 is a proposal aimed at "acting now to stop the electrical reliability crisis that is approaching faster than most people want to admit," Mills said. "Coal-powered electric generation plants have been the foundation of our electric grid and will need to be that for the foreseeable future. We're shutting down too many reliable coal-burning plants too fast."

The bill was approved by the Senate Natural Resources and Energy Committee on Feb. 22 and has been referred to the Senate Rules Committee.

Coal retirements

Nearly 58 GW of U.S. coal plant capacity is projected for retirement by 2030, according to Market Intelligence data, with the potential for the federal Inflation Reduction Act to accelerate the trend. Federal power provider the Tennessee Valley Authority, which operates in Kentucky, expects to exit coal generation by 2035, replacing at least part of the fleet with natural gas generation. Duke Energy said it is aiming to reduce its coal fleet to about 5% by 2030 and completely exit coal by 2035.

Other states have also pushed back on utilities' plans for coal retirements. In December 2021, South Carolina regulators rejected Duke's preferred power plant construction plan, instead approving a plan that would allow the utility to continue operating some coal plants through 2035, rather than the 2030 deadline Duke proposed.

A June 2022 report from the Southern Alliance for Clean Energy found that Southeast utilities' plans may fall short of the trajectories recommended to avoid the worst of the climate crisis, at least in part because of emissions from remaining coal generation.