Clean-coal cost recovery bill passes Ky. committee, goes to House

Washington (Platts)--8Mar2006

Legislation aimed at encouraging the development and construction of
clean-coal power projects in Kentucky was approved Tuesday by the House of
Representatives' Tourism Development and Energy Committee and sent to the full
House.

H.B. 538, sponsored by state Representative Robin Webb, is given a good chance
of passing the legislature before lawmakers adjourn their 2006 session in
early April.

The bill was prompted by American Electric Power's stated intent to build at
least two 600-MW integrated gasification combined-cycle plants in its service
area, with Ohio and West Virginia apparently the leading contenders for the
approximately $1.3 billion projects.

But Kentucky remains in the running for a plant, AEP continues to say.

Under H.B. 538, a utility is entitled to recover "costs for investing in
clean-coal generation." It provides for the establishment of a customer
surcharge "in order to obtain reasonable return on expenditures relating to
clean-coal investment costs" and the periodic review of the surcharge and any
adjustments and refunds, if warranted. It also allows the Kentucky Public
Service Commission to retain jurisdiction to review surcharges.

Consumer advocates including Thomas FitzGerald, executive director of the
Kentucky Resources Council, are concerned with the bill. FitzGerald contends
the bill is so "broadly written" it would enable developers of other
coal-fired generating projects, including E.ON US, to "get a return on capital
and equity upfront." E.ON US, formerly LG&E Energy, is building a 732-MW
coal-fired expansion at its 547-MW coal-fired Trimble County baseload plant.

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