Business, Government Legal News from throughout WVUtility companies try to weigh which works better for power plants: Installing scrubbers or going with natural gas?

In its decision-making process to meet newer, stricter air pollution requirements of the EPA, American Electric Power at first announced it would shut down one coal-burning unit of its Big Sandy Power Plant in Kentucky about 20 miles from Huntington and replace the other coal-burning unit with a gas-burning one.

But on Dec. 5, 2011,  AEP issued a statement saying it would instead apply to the Kentucky Public Service Commission for permission to keep the coal units and install scrubbers instead.

In an interview last week, AEP CEO Nick Akins explained to The State Journal why AEP chose coal and scrubbers over gas at Big Sandy.

Akins said the cumulative impact of the number of new EPA regulations — mercury and ash disposal among others, has AEP re-evaluating the size of coal-burning units it can afford to upgrade with scrubbers. Before, the threshold had been 500 megawatts. It could soon increase to 800 megawatts, which is the size of the larger of the two units at Big Sandy, he said.

"We had to make a decision, and we needed the commission there to help us make a decision: Do you want to continue with coal and the socioeconomic benefits of coal, or move forward with a natural gas-fired unit?" Akins said.

"We still showed economics that showed the scrubber was better from an economic perspective. So we had discussions with the state about what those options are. I think you're going to have more of those kinds of discussions occur with state jurisdictions, particularly as it relates to the economics of coal. You have to look down the long term versus looking at the short-term supply of natural gas, which may change over time. And I think that's critical. We offered to two, and then the proposal actually was for the scrubber."

Kentucky PSC spokesman Andy Melnykovych said AEP has filed for a rate increase to recover the cost of construction and return on equity for the scrubber. The increase would be about 30 percent for residential customers, he said.

The application is in the discovery phase, and the Kentucky PSC has scheduled a hearing for April, Melnykovych said. Three parties have been granted permission to intervene in the case: the attorney general's office, which by law represents consumers; Kentucky Industrial Utility Customers Inc.; and the Sierra Club.

The owner of a gas-fired peaking plant near the Big Sandy plant also has asked to be allowed to intervene, Melnykovych said.