Owensboro Municipal Utilities in Kentucky will cancel a contract to purchase power from a planned solar project based on concerns that future transmission costs could make the deal too expensive.

Owensboro Municipal Utilities, or OMU, had planned to purchase 32 MW of solar power from the 86-MW Ashwood Solar I Project starting in late 2022. That project, a joint venture between MAP Energy Solutions LLC and Open Road Renewables LLC, will be built in Lyon County, Ky.

The City Utility Commission voted Dec. 10 to allow OMU to exercise an option in the contract signed in 2018 to cancel the deal if certain transmission contingencies were to occur.

At the Dec. 10 meeting, OMU General Manager Kevin Frizzell explained to the commission that the matter is tied to a March 2019 decision by the Federal Energy Regulatory Commission to remove a regulation that prevented Louisville Gas and Electric Co. or LG&E, and Kentucky Utilities Co., or KU, from charging pancaked rates.

The municipal utility is in the LG&E/KU balancing area. But as OMU develops its next integrated resource plan, the municipal utility is likely to consider moving into the Midcontinent ISO, Frizzell said. Doing so would require OMU to pay an extra transmission fee to get power from the Ashwood project, which is in the LGE/KU balancing area.

"At this point, we haven't made a decision to join MISO, but it is a significant likelihood, and if that happens, we can't take the risk that we would have to pay excessive costs for the Ashwood solar power," he said.

Cancellation of the contract means OMU loses the renewable energy provided by the project for the time being, Frizzell said. But joining MISO or another regional transmission organization would give OMU an opportunity to access renewable resources and incorporate them into the utility's power supply plan, he added.

Frizzell said he understands that MAP Energy Solutions and Open Road Renewables still plan to move ahead with the project. The Kentucky Municipal Energy Agency has a contract to buy nearly 54 MW from the Ashwood project starting in late 2022.

Representatives for the developers were not immediately available to comment.

LG&E and KU are PPL Corp. subsidiaries.